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As a value investor, he struggles on how to make an investment case for this company. He understands the magnitude of its membership base and the pathway to monetize that. But even under those assumptions, looking at the valuations on a forward PE or EBITDA basis, it looks very expensive.
Likes healthcare. Ever since Hillary Clinton tweeted on drug costs, the whole space has been under fire and under pressure. Valuation levels on a lot of the stocks are starting to look attractive. He believes in the long-term demographic shift towards healthcare stocks. Doesn’t think you will go wrong owning this. He would prefer Pfizer (PFE-N) which trades at 13X earnings with a 4% dividend yield. Also, feels their pipeline is very undervalued.
He really likes this and just recently entered it. An aggregation of a bunch of different commodities giving you exposure to met coal, copper, zinc as well as oil. He also likes the assets they own. Because it has pulled back from $35 a share, down to $26, this is an attractive entry point. There is some volatility, but being spread across 4 different commodities should dampen that a little.
He exited this recently. They have fantastic assets and a pretty good stake in the Eagle Ford area, which is a prolific area with high quality assets. They also have assets in Canada in the Peace River area. A very good portfolio of assets. His concern is the balance sheet. They have a ton of debt, and the market is concerned about that. When you have a levered talent sheet, it limits your ability to grow production, which is what is happening in this case.
He likes the assets and their growth profile, and thinks they are doing the right things. They are in a lot of key areas that he likes. Doesn’t feel you would go wrong owning this. Has a pretty decent balance sheet and a good production growth. They have a lot of non-core assets that they can shed to shore up the balance sheet.
A great business. One of the best group of investors in all of Canada. Very sharp, shrewd. They know exactly what areas to be in. It is a growing business. They have a fee for service business and look to deploy capital in interesting and innovative ways. He would wait for a 10% pullback.
His general view on iron ore is a little negative. If you look at the supply/demand dynamics, it is more skewed towards an oversupply situation. Feels we are going to be in a situation where it is going to be a surplus. Iron ore has had a nice run and almost got up to $100 a ton. Doesn’t think that is sustainable, and thinks it pulls back to the $60-$70 range.
About a 50/50 mix between oil and natural gas. It has a big balance sheet, and they are going to have to look to do something to fix it. Have some very good assets. Seymour Schulich is a big shareholder and has been buying a lot of stock on the open market, which is a positive sign. At these levels, he doesn’t think it is compelling enough given the risks you are undertaking.
A very interesting company and a very good business. They own gas stations and convenience stores across North America. Made a very large acquisition of CST very recently, which is going to close in Q2. He struggled with the valuation. He would like to see another 5%-10% pullback before getting interested.
In the commercial satellite business, which he likes. A little bit lumpy from time to time, depending on what kind of orders they get and where they are in the cycle. They acquired Digital Globe, a US satellite imaging business. They are levering up the balance sheet quite a bit at 4X leverage, which is above his comfort zone. At 8.5X EBITDA it is not cheap enough for him. He owns a competitor, Urthecast (UR-T), which he would encourage you to look at. Smaller, but very much a growth story.
As a group, he is not overly excited about Canadian banks. Prefers US banks, but owns a small position in this one. It has a very good ROE, and are able to compound the book rate at very high rate. Also, likes their US exposure. Very good capital markets franchise, a sector that he is very optimistic about. Trading at about 13X earnings which, over the long-term is a premium multiple, but with their growth profile, it makes sense to pay that premium.
A Canadian software/hardware company which operates in the telematics space. Very much a secular growth story. They provide hardware which goes into trucks, such as UPS, and tracks how efficient a truck is being on fuel, following its routes correctly, as well as safety things like seatbelts being buckled, etc. Sends the data back to the head office to assess. There is a lot of competition, but they operate in several niches that insulates them from the general competition. (Analysts’ price target is $2.00)
His way of playing the energy infrastructure space. Very good assets. They have stream assets and pipeline assets. Their major asset is a 50% stake in Alliance Pipeline, which runs from the Northeast BC region down to Chicago. The Northeast BC region in the Montney and Duvernay regions is very prolific and very robust. This is cheap trading at 9.5X AFFO compared to its peers trading at 12.5X. Dividend yield of 7.38%. (Analysts’ price target is $14.88.)
