COMMENT

Canadian Banks. He doesn’t own any of the Canadian banks. He sees risk because of the level of consumer and mortgage debt. He doesn’t see attractive rates of return in the near future but if investors must hold Canadian banks, he would recommend a higher-quality bank such as the Royal or TD.

DON'T BUY

He sees them as a black box in terms of how they price their contracts. They have complicated accounting and legacy-related challenges (such as the contracts written by John Hancock.) They have a new CEO and the new strategy is not yet clear. He prefers Intact Financial.

BUY

He prefers this to Manulife. They have been a consistent operator over time. They have gone through some softness in their quarters, especially in their auto division, but he expects them to raise rates soon to address this.

COMMENT

Has been hitting on all cylinders for several quarters. He has owned it. As its valuation has expanded, he has reduced the amount he owns. Their platforms are still growing. Their fundamentals are driven by cloud adoption.

BUY

He finds decent value in the utility space now. This is a stable business. Rising rates can continue to weigh on this stock, but much of that has already been priced in. This is a high-quality business that will continue to grind out cash. It has growth opportunities in Florida and elsewhere.

COMMENT

Volatility in the market. The tax package in the United States is raising concerns about inflation and rising interest rates. As the market transitions from a pairing of high growth and low inflation to its next stage, higher volatility is normal.

DON'T BUY

He doesn’t own this. Airlines are very cyclical and are traditionally poor capital allocators. WestJet has been better with capital, but there are concerns after the pushing out of their CEO. The underlying issue might have been labor relations and perhaps the new CEO can manage this better. However, airlines are getting late in their cycle, so the sector has a lot of risk. WestJet is trying to grow internationally, which is inconsistent with their original focus on the local market using one type of plane.

DON'T BUY

He doesn’t own this. Airlines are very cyclical and are traditionally poor capital allocators. WestJet has been better with capital, but there are concerns after the pushing out of their CEO. The underlying issue might have been labor relations and perhaps the new CEO can manage this better. However, airlines are getting late in their cycle, so the sector has a lot of risk. WestJet is trying to grow internationally, which is inconsistent with their original focus on the local market using one type of plane.

COMMENT

This trades at a premium (compared to Manulife) now, and historically. The gap has widened recently. They have more fee-based revenues in their business, which is preferable. He generally prefers Intact Financial for insurance investments.

PAST TOP PICK

(A Top Pick December 27, 2017. Down 2.09%). It’s currently in a bit of a limbo period, waiting for regulatory approval of a large acquisition (they bought The Linde Group, which is a peer of Praxair) to close. Praxair is a very good operator but the industrial gases business raises monopoly concerns, so the regulator will have make decisions about which businesses Praxair will have to divest. He expects the business to do well after the regulatory decisions are made. [Note: There was no table for this stock at the end of the end of the segment to show whether he owns this stock or not.)

PAST TOP PICK

(A Top Pick December 27, 2017. Down 4.49%). This is a player in restaurant equipment. They have done a great job deploying capital into complementary kitchen equipment businesses. They do a great sales job, explaining the value of new equipment for water savings, energy savings, etc. Their margins have been under pressure but he believes this will improve over the year.

PAST TOP PICK

(A Top Pick December 27, 2017. Down 10.29%). This is a natural gas stock. There is a cloud of negative sentiment around Canadian energy. He believes that the cloud of issues that plagued Canada in 2017 are resolving themselves. He sees this as a low-cost operator and disciplined. He expects this company to do well at the end of shakeout. Tourmaline added a dividend, which shows a lot of self-confidence in the company. They have very strong management, very high insider ownership, and is committed to the shareholders.

DON'T BUY

They’re in the middle of a transition, trying to improve their use of capital and the utilization of their ships. The stock has had a great run for the past several years. He likes the metrics they are focusing on but he is not following it closely today because of its high valuation.

COMMENT

Buffet has put together a strong collection of consumer and industrial businesses. However, he is having difficulty in putting capital to work. He has 120 billion in cash on hand and is having trouble finding good places to put it. The company has a good succession plan and they have diversified their operations which will ease the transition to new management after Buffet is gone.

BUY

He owns both Fortis and Emera. They are attractive, stable, dividend payers with similar drivers. He slightly prefers Fortis.