(A Top Pick March 14/17. Down 6%.) *Short* The company has reported twice since this was picked. Reported a very bad 4th quarter and a reasonably good 1st quarter. This revolves around the shift to passive investing, and the lack of a market for them to sell their financial products. A very competitive space. Any EPS growth they have is a result of share buybacks.
He is short this. They build and operate mobile hydro-vac trucks or excavations. They always had a competitive advantage in that they basically invented the hydro-vac truck space. Now though, anyone who can get financing, can effectively have one of these. They have had a very large number of executives leave over the last couple of years. He also feels they have the potential to be harmed by a border adjustment tax, as they manufacture in Alberta and ship into the US.
He is a gold bull currently. This company generates a decent amount of free cash flow. First quarter was an ugly quarter across the board and the stock reacted accordingly. One of the few names you can get in the gold space that generates a reasonable amount of free cash to the bottom line, which is something he focuses on. A reasonable long-term gold name to own. The net debt number is not something that alarms him.
The largest North American manufacturer of fiberglass underground fuel tanks for gas stations. A huge free cash flow generator. They just paid another special dividend after reporting Q4 numbers, as well as raising their common dividend again. They effectively generate more cash than they really know what to do with. A fantastic name to own for an income oriented investor.
He tends to favour engineering names such as SNC-Lavalin (SNC-T). Construction names are a lower margin business, and end up being hyper competitive, and results never seem to trickle down to the common shareholder. If looking for exposure to construction and stimulus spending, focus more on the engineering side.
This is probably a good entry point in buying the subscription receipts. They are in the process of trying to acquire Washington Gas and Light, a large US utility. Did a large financing, issuing subscription receipts, which turn into the stock if they close on the acquisition. They are actually trading at a discount, so a pretty reasonable way of entering the stock.
Airlines are not exactly bastions of free cash flow. They are going to be challenged for the next while, having such a large base in Western Canada. Unless oil comes roaring back, they are going to be challenged for growth and, as a result, will have to move further and further into direct competition with Air Canada (AC-T), which usually never works out well for airlines. There are better names to own.
He is Short this and Long on a copper producer. Doesn’t have anything against the company, it is more about the coal space. Metallurgical coal is a commodity that has had its run. Feels that the expected free cash to be generated through 2017, are probably misguided. We are starting to see a lot of coal capacity come into the market after the run-up in prices last year.
This has been a good stock. They are money makers, but it is not exactly a big growth space. The absolute number of gas stations is shrinking both in Canada and the US. After their most recent acquisition, this company will not be able to grow in Canada any more. It will probably turn into more of an income vehicle at this stage.
(A Top Pick March 14/17. Up 9%.) *Short* A small manufacturer and aviation company. The aviation side of the business is far more important to them. They operate several regional airlines that service northern Canada, as well as the east coast. They also have an aircraft leasing business, Regional1 in the US. His issue is very much around their allocation of capital and that they spend their cash flow in a very dramatic way. CapX is greater than their operational cash flow, plus they have debt, plus they pay a dividend. Not a sustainable way to run a business.