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Very interesting and quite sophisticated technology. The problem is, it is a hardware company. They always have a problem of fighting against a better and cheaper mouse trap. A Chinese competitor has been quite aggressive in pricing. He doesn’t like the long-term fundamentals. If he had to choose between a Long or Short position, he would choose the Short.
He really likes this. It used to trade at a significant discount to the utility sector, but it should have traded at a premium because of its better growth profile. He likes their US acquisition which was more on the HVAC business, so it is more on the service side, other than the traditional water heater business they’ve been in. They also have a sub metering business, which doesn’t get a lot of attention. Sub metering helps when you have multiple units such as condominiums or apartments. This has a nice growth profile, and has a decent yield to it.
Preferred B. Recently reported and had a reasonable set of numbers. What caught the public’s attention was the pre-release that Canaccord (CF-T) put out last week, where they had such an exceptional Q1 that they pre-released their numbers and the share price responded accordingly. GMP’s quarter was an OK one, but certainly not like Canaccord’s. However, it shows the potential of both businesses. GMP has really positioned themselves to be a strong leveraged play on the oil/gas and mining sectors. They also have an attractive asset management business that got a lot of focus last summer and fall, with the Richardson operation. A very attractive takeover candidate. He would want to see more evidence of recovery in the mining and oil/gas sectors and to start to see some of their investments come to fruition.
(A Top Pick April 26/16. Up 8%.) An asset based lender to distressed companies. They deal with companies that banks won’t touch. A controversial name and is down about 20% in the last 2 days. It is in the midst of a privatization process and had 19 expressions of interest. They’ve reduced this down to 6 or less. The guidance range as from $18-$22. Given that the stock is trading at about $14 with a 7.5%-8% yield, the privatization announcement is scheduled to take place prior to the end of June. With less than 2 months’ horizon it is a pretty good risk/return in his view. He thinks he is going to have a very happy outcome 2 months from now.
(A Top Pick April 26/16. Up 165%.) Internet domain names was viewed as a very flat, dull business. He felt this was under the radar screen and not a lot of attention being paid to it. It is now trading 19X this year’s EBITDA, so it has gotten a little ahead of itself, and may be a little expensive.
(A Top Pick April 26/16. Up 27%.) *SHORT* (Pairs trade with a Long on Air Canada (AC-T). This Pairs trade is driven more by the Short side than the Long side. This company has always had razor thin margins, and if the wind blows in the wrong direction they tend to have a loss. He would continue with this position.
A recent Short report made some interesting points. Although he doesn’t like serial acquisitors, he likes that this company is very focused on what they are doing. When they make an acquisition, they typically get 50%-51% of the business, so they consolidate it. Their revenue numbers are generally growing much faster than their earnings because they have to take out the minority interests. They are recognizing 100% of the revenues, but effectively are only getting 51% of the earnings. That was one of the thrusts of the Short report. The other was that they were being paid to use an MD to administer their deep sedation (used in colonoscopies), but using specially trained professional nurses instead. A decent company, he is just not sold on it yet.
He likes the business model which makes a lot of sense. They make composite carbon fibre tanks that are replacements in gas stations for existing metal tanks. A nice growth business with a clear profile to it. It has had a great run. He will be meeting with management in the near term.
Their product is in tight and shrinking supply, and demand is increasing. Asian demand has been picking up dramatically. There has been a cut back in certain quotas which hurt the supply side. It has been 2 years in a row where there has been a selloff in the winter and it has come back in the summer. This is a long-term hold.
A geothermal play in Nicaragua. He saw a presentation in January where they finally got their utilization levels up to a reasonable level, which isn’t that far from a point where equity investors are wiped out. They are now at a point where they could start generating cash flow. Instead of milking this as a cash cow, they are going to spend some more money, and he shook his head in disbelief. He would run for the hills from this stock.
They produce a chemical that is used in a variety of products. Have the world’s biggest succinic acid plant. It seems that anything that could go wrong did. They did 2 financings which were not well received by the market. There was also a profit warning on their Q4 numbers. They had a shipment that was paid for, but hadn’t been shipped, which they had been recognizing as a sale. The CEO and CFO are no longer there. Still thinks this is a very good story. They need to demonstrate 2 things. 1.) They have to show that they can actually operate the plant at a reasonable level. 2.) They need to prove that someone wants to buy their product. He has stuck with his position because he thinks it is a very strong story.
He really likes this. There is a scarcity of listed toy companies globally. About a year ago, they acquired Swimways, and this coming quarter is going to be the 1st quarter that will show their contribution. It is kind of countercyclical to the traditional peak season for toys, which is nice. Thinks the next quarter will be decent. A great company for the long run.
This has come up a lot this year, down about 33% YTD, partly due to the last 2 conference calls. Earnings had disappointed in both. Investors waited about 4 years for them to get their bank license which came in September, and it was going to be 6 months before benefits would be seen. In the last quarter, there wasn’t a lot of evidence of that. About 3 years ago, the company went into the payments business, and have been building up a business in that, so there were a lot of expenses, but no sales. Because of this, expenses have grown much faster than sales growth. They’ve built a lot of infrastructure, and they now need to grow into that. He has a lot of confidence in the CEO. Expects that the next quarter is also not going to be a great one.