This has made a number of transformative deals, with Tim Hortons being the major one. Their strength is in cost cutting, and they’ve done a very good job managing that. There has been a little controversy lately of how far they go on costs. Not a cheap stock. Has a healthy amount of leverage. There are some well known catalysts including refinancing, a very expensive pref instrument, which will drive earnings growth and accelerate it heading into 2018. He likes this and would own more if it was cheaper.
An outstanding business model. It is e-commerce resilient. The unit economics are very, very strong. A very durable moat type business. They make a ton of money on membership fees, and are about to increase them in July, which will be a nice earnings tailwind. However, it always comes back to what you want to pay for it. He is waiting for a better entry point. Dividend yield of about 1.1%.
2016 was a tough year, and 2017 is a continuation of that. Railroad ties and utility poles. A business with a natural barrier, because they are heavy and can’t be transported too far. Also, they need a license to produce ties because of the type of wood preservative used. Railroad ties wear out over time based on age, train weight and how many times a train goes over that tie. In the latter part of 2016, there was some pressure as Class1 pulled back and effectively de-stocked a little which created pressure. Also, wood pricing moved, so that they knew pricing was going to come down, and there was a cost mismatch between inventory and what they could sell for. The back half of 2017 is going to get better. Not a bargain, but a reasonably fair price if you’ve got a 2-year time horizon.
This is a powerhouse. A well-run company with significant management ownership via Woodbridge. He has a lot of respect for the team. Not a cheap stock. Free cash flow this tear will be a bit lower, primarily due to one-time items. He looks 2-3 years out and the amount of free cash flow they can generate. The free cash flow yield is fair, not great. It gets out to about 6.5%-7% a little farther out. This gives you a healthy dividend and modest share repurchases. They are very good at allocating capital. He would own more at a lower price. A lower risk/high quality business.
A very well-run company and very dominant, because they basically have a lock on the Canadian market for time sensitive airfreight. They’ve been able to get more and more contracts, build on the network affect and reinvest in better capacity. Not as cheap as it was, but generates a healthy amount of cash flow, particularly as they get past the final plane refreshes. Dividend yield of 1.6%, which will grow.
Trading at one of the lowest premiums to the S&P than it has for a long time. A great business. Very strong brand. Have had some operational issues lately, partly to do with their North American operations; the new mobile app and issues it has created in the stores. They are working through that. Also, China is very important for them. Generates great returns. Well run and getting cheaper than what it was. Still not cheap though. When he thinks it is appropriate, he will Buy. Dividend yield of 1.8%.
He would value this on a free cash flow basis, looking 1-2 years out. It has come off a little and free cash flow yield has gotten a little better. Management has done a great job. However, top line growth is only at about 1%. They have to spend a lot of money to continue to work on the network to stay competitive. Dividend yield of about 5%.
Market. He has had to go far and wide to find decent equities. He has had analysts in China, Japan, the UK, throughout the US, all in the past month. Today it is tougher to find value. Valuations are fairly full. He is finding more value in the UK now than he has pre-BREXIT.