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All the US financials did well after the election, on the premise of less regulation and potentially higher rates. This bank has recovered from where it came from back in the recession, and is still trading below BV. The ROE is still mid-single digit. Usually there is a very strong relationship between Price to BV and PE multiples based on ROE. The company is improving, and most of their past problems are behind them.
9% dividend yield, and usually when they get this high you have to be cautious. They acquired the Shaw media assets, and are presently integrating that, so you have to keep an eye on it to see how it gets along. She has no desire to own this name at this time. She prefers something like Disney (DIS-N).
Has held this in her clients’ portfolios for a number of years. She owns this for its exposure to emerging markets, the consumer packaged goods. Over 60% of revenues are from emerging markets. A lot of the economies in emerging markets have been going through a difficult time, so this is affecting them. Given the pullback, it is an opportunity. Long-term, this is where their secular growth is. They have been expanding into personal care, which tends to have higher margins than the packaged foods business. Has an attractive yield of over 3%.
They are developing non-theatre sources of revenue. Opened their 1st Rec Room facility in Edmonton, and are planning a couple more in Toronto in 2017. They’ve also brought in online gaming through E gaming. Also, their Digital media side is doing quite well. Management are very good operators. They can’t control the theatre slate, but are very good at increasing how much you spend in the theatre. 3.2% dividend.
Energy infrastructure, and there is always a need for these types of companies. As oil and gas companies drill they need to process the natural gas and liquids. Prefers Pembina (PPL-T) and Inter Pipeline (IPL-T). As natural gas prices improve, there will be increasing demand for what they do. Dividend yield of 6.2%.
(A Top Pick Jan 12/16. Up 17.96%.) A systems integration and outsourcing firm, about half and half. The outsourcing portion is very stable with a recurring revenue stream. They grow organically, but do make big acquisitions every few years. Their 2012 Logica acquisition really expanded their geography into Europe. It was a very low margin business when they bought it, and those are now almost back up to their corporate level. They are ready to make another acquisition, but management is very disciplined on how much they are going to pay for the returns that they want. They are seeing pretty strong demand from their financial verticals because of increasing competition, and FINTECH because a lot of financial institutions are trying to improve their legacy systems through productivity and client servicing. There are also opportunities in cyber security in digital commerce, which they provide.
(A Top Pick Jan 12/16. Up 9.19%.) She prefers this over others, because they have higher margins and are executing better. This is really a play on improving employment, improving GDP growth and higher housing. Housing turnover is a very important metric. When someone buys a house, they usually want to do some work on it. They’ve been seeing very good same-store sales growth. Online is only about 5% of their revenues, but it is growing. Online commerce is not a potential threat for them.
(A Top Pick Jan 12/16. Up 7.14%.) This has lagged in this rally, probably because it is not the traditional financial institution. It is really a play on the secular growth of online/digital payment. Currently 85% of all payment transactions are still cash. The emerging-market is over 90% and developed market is under 60%, so there are still a lot of opportunities.
The stock had been doing very well. It was a defensive type name. A lot of interest sensitive utility type names pulled back after the election. There is kind of a rotation out of these into more growth economically sensitive names. The drop provided a nice entry point for someone who wanted to have utilities in their portfolios.
An auto parts manufacturer. All these manufacturers are trading at pretty low multiples. Typically, it is a lower type multiple industry. An overhang on the group right now is that auto production has likely peaked at 18 million units. There are increasing incentives in a lot of the pickup truck space. Europe has been very slow to turn. A well run company, and you could probably hold it here longer-term. Potentially, the election could be a negative for the group.
Market. The US economy was growing even before Donald Trump was elected. We’ve had very steady employment gains, and are starting to see some wage increases. For Canada, there was a bounce back in GDP, and things are improving. She constructive on equities, because the profit growth is there. It turned positive in the 3rd quarter. If Trump reduces corporate taxes and repatriates funds, it is something that he will do quickly, which will improve after-tax profits for US corporations. Longer-term, she believes the secular growth is in emerging markets, so now might be a good time to look at names that have not moved. Emerging markets have been lumpy, and a stronger US$ puts them in a difficult position.