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A great Canadian success story. Had an amazing year last year, so it is very hard to keep up with those types of comps. They enable small and medium-sized businesses. Because that is the largest actual part of the market, this company will continue to grow with those customers. On the larger size companies, they have done some deals to help break into that market. It is going to be very hard to repeat the performance of last year, so people should moderate their expectations somewhat.
Has always liked this, but they are still exposed to areas of the economy that are struggling. It is going through a transformation right now and there will be bumpy quarters along the road. We are going to see a turn around in US military spending, as well as elsewhere in the world.
This has the Aero plan business with Air Canada (AC-T), and that contract comes up for renewal in 2020. That is a massive part of their business. They are going to have to renegotiate the contract, and one of 2 or 3 things is going to happen. They are going to have to pay Air Canada for the rights to continue, and/or Air Canada is going to take it back. For Air Canada, this is a massive program. Until there is more clarity on that contract, people have to be nervous as to how it is going to turn out.
This company transformed itself over the last couple of years. Unfortunately, it did it at a time when commodity prices were collapsing. 3 years ago, they bought Aurora and got into the Eagleford, one of the best development plays in the best area. Paid a pretty high price which hurt the balance sheet quite a bit. In the meantime, their Canadian heavy oil program was going on, the area that really got hurt when commodity prices collapsed, and ended up with a debt heavy balance sheet. They’ve done a lot to clean that up, and have just recently begun on the growth path by making an acquisition in Western Canada. There is a lot of “show me” that now needs to happen. It has become a play on commodity. There are better opportunities elsewhere.
He likes this. A private equity way to play the market. It was spun out from Brookfield. Very smart management team that looks at numbers of deals every day, backed by the balance sheet of Brookfield. There are very few deals they can’t get into. In the last quarter they announced on 3 different acquisitions, one in Brazil, one in India and one in Europe. At the same time they acted like a true private equity player by disposing of an asset that they made 200%-300% on.
All Canadian banks are in a great position. They are in a very protected market in Canada. None are expensive and have all suffered from years of declining interest rates. We are now starting to see a trend toward higher rates in the US that will filter into Canada at some point. That net interest margin they will get exposure to, will start to grow, and profits will grow as a result. This bank has more exposure to emerging markets (Latin America), and there is a threat from the US because of the protectionist policies. Not a name he would be concerned about.
Gold? Post the election, his initial reaction was that the market would sell off and safety assets like gold would rally. That happened in the first 4 hours, and then there was a complete reversal. Safety assets like gold got thrown out, and as a result, the company’s leverage to them sold off even more than that. Coming into 2017, as people start to question whether or not these policies get enacted, we are seeing people come back to precious metals. Even as some of these policies do get enacted, they are going to be inflationary in the US. He would stick with gold. There is a lot to be said for it.
A developer brand in organic food space. Recently broke into Loblaw’s (L-T) and some other food chains. An acquisition driven story. They have quite strong organic growth of 20%+ a year, but will continue to acquire brands, develop them, and expand them from within. It is everything from baby food to pet food to drinks. Expects they will come out with a lot of new names that will appeal to the millennial generation. (Analysts’ price target is $2.10.)
This moves 90% of overnight cargo business in Canada. They have Canada Post, Air Canada and are beginning to grow outside of Canada as well, with routes to Europe and Latin America. Well run with a very strong free cash flow yield. Not a cheap stock. Dividend yield of 1.52%. (Analysts’ price target is $55.60.)
A very safe way to play gold. It is a royalty company, not a miner, so there are no mining risks. It is in geographically safe jurisdictions, so you don’t have the same risks of a project being taken back and privatized by a government. Diversified broadly across tons of different royalties, not just in precious metals, but also in the oil/gas space. Dividend yield of 1.31%. (Analysts’ price target is $96.01.)
(A Top Pick Nov11/16. Up 9.47%.) (BNN showed June 27/16! – Bill.) This has been a long term holding, and he will continue to hold it. Did a very successful equity financing last quarter to buy out a partner in a wind project in Ontario. They’ve completed that and it is very accretive to the company. As a result, they boosted their dividend.