Trans Mountain Pipeline. He thinks the Trans Mountain pipeline nationalization was caused because of the Federal government forcing themselves into approving only one pipeline. He does not want to see another National Energy Program. He is hoping the move will convince investors to come back to Canada. The challenge will be finding a buyer once the pipeline is completed. Hopefully this is a good thing for Canada and Alberta.
Market. Value is coming back into equity markets, albeit with higher volatility than last year. Economic growth has been tepid for the past 10 years, but at least it is still growing. He feels we are in a much more positive environment than before. This is a good time to be choosy when buying stocks – look for good management and balance sheets.
He thinks the Ontario election could cause some danger. This has been a political football for many years. There has been mismanagement of the hydro assets, which has resulted in dramatically higher rates over the past 12 years. Are you really buying a private company, when the government still owns over 40%. They have been attempting a US acquisition, which may face delay if there is a new government. Shareholders have a chance of being treated poorly following the election. An NDP government may look to purchase the privately held shares but would not likely re-purchase them at the issued price of $20.50 per share.
He has been watching this closely. It trades below book value, which has historically been a good buy signal. They have had some operational issues, but their input costs have been going down which should overall improve margins. Container board sales have not been as strong as hoped. The tissue industry is also somewhat oversupplied right now. Buying under $12 is a good area, where he thinks it would go back to $15 to $18.
He is a fan of this company and has recommended it in the past. It has not worked out to date. They have been paid out on some of their assets, yielding a return on investment over 40%. The key will be in how they redeploy the money. Management is doing a good job at getting the story out. He does not think the dividend is at risk if they can deploy the capital before year end. He considers it a speculative buy. Yield 10%.