COMMENT

Markets. He thinks the equity market looks decent for the next year, but acknowledges that the declining prices of copper and zinc would traditionally be interpreted as signalling a potential recession. He thinks the U.S. economy is still growing and that Canada’s will grow with it, at least for the next 12 to 18 months. In contrast, economic indicators for Europe rolled over almost a year ago. As the U.S. dollar rises, the cost of servicing US-denominated debt is rising for European and emerging-market businesses. The yield curve is close to being inverted (short-term interest rates higher than long-term): this usually indicates a recession is coming, sometime in the next 14-34 months. Typically, equities continue to rise, by about 15%, for about 18 months after the yield curve inverts, before the recession hits. In addition, there are reasons to expect the yield spread to widen, with long-term rates rising significantly in the next few months.

DON'T BUY

This stock ranks well in the 700 stocks in his dividend-stock database, but its near-term cash flow is negative, in comparison to 3-year and 5-year cash flow growth which have been OK. In contrast, Rogers ranks as an OK-to-buy stock in his system.

COMMENT

He met with them a month ago. They have a trial underway in Northern Ontario, delivering packages that are less than 10 pounds. The stock has been going sideways while people wait to see whether the trials are successful. He thinks success is a sure thing. They’re also moving to much bigger drones that can carry a skid-sized container (up to 2500 pounds) for long distances. Thus they will be able to provide delivery services for a company like Amazon, of mail for Canada Post, and of medical or food supplies to remote communities.

BUY

Comparing Canadian Tire (CTC/A-T) and Dollarama (DOL-T). He sees Dollarama as the one you throw in a box and look at it 3 years later. The stock is expensive, but it continues to show 11% sales growth and 12% earnings growth. They have more room to grow in Canada and their international division provides further significant growth opportunity. Over a long-term time frame, he expects Dollarama to do quite well.

COMMENT

Comparing Canadian Tire (CTC/A-T) and Dollarama (DOL-T). He sees Dollarama as the one you throw in a box and look at it 3 years later. The stock is expensive, but it continues to show 11% sales growth and 12% earnings growth. They have more room to grow in Canada and their international division provides further significant growth opportunity. Over a long-term time frame, he expects Dollarama to do quite well.

BUY

This company is an antenna specialist. It just acquired two other companies in its space. He sees great opportunity for Baylin in the 5G telecom rollout because it requires a huge number of small devices with sophisticated antennas.

BUY

He has worked as a consultant for this company for over a year. They continue to work on their CapitalCube service, which is doing well, and on improving their AI-based offerings. They can provide automated analysis of small companies that are underfollowed, which makes them attractive to Thomson Reuters. They have fintech opportunities with some very large banks around the world. They acquired a Boston-based company that is growing well. They have also developed extreme interest in a workflow product for dispatching workers and vehicles, to improve workforce efficiency.

COMMENT

Route1 provides security services to companies, including letting you safely use your computer in a public place, like a cafe, and letting you totally delete the contents of a laptop at a distance. He uses this company’s services. They are also using their technology as a basis for expanding into new areas, providing potential growth over the next year. He has owned the stock in the past, doesn’t own it now, but sees a lot of potential.

DON'T BUY

The dividend is 10%, and the payout is 84% of trailing cash flow. He prefers to buy stocks that pay less than 75% of their cash flow. Earnings grew significantly last quarter, but estimated earnings decline this year and grow modestly next year. There is an extremely wide spread of earnings estimates, making valuation of the company more challenging. He thinks there are better risk-adjusted returns in other stocks. He thinks it is likely that the dividend will be maintained, but at an 84% payout ratio, there is a risk that it will not be maintained and reduction of the dividend would cause a drop in the price of the stock.

PAST TOP PICK

(A Top Pick July 14, 2017. Down 13%). He sold it at a loss. He thinks it might be OK to buy again but his model tells him to wait a bit longer before buying it back.

PAST TOP PICK

(A Top Pick July 14, 2017. Up 24%). This is a garbage company. It is relatively recession-resistant. He thinks there are still good opportunities for it. He expects it to grow by acquisition. They have tons of free cash flow to support that acquisition program.

PAST TOP PICK

(A Top Pick July 14, 2017. Up 35%). He sees ongoing opportunity for this infrastructure company, with new technology that can help in maintenance and expansion of roads and bridges.

DON'T BUY

The stock popped significantly after the approval of online sports betting in the US. It then pulled back a little and has advanced again. There is a lot of optimism for the future of this stock. However, the two analysts that cover the company expect either break even or loss of a penny per share at year end in August 2019. Thus, even though the company is worth more than it was a few months ago, its P/E ratio is extremely high and the actual value of the company is uncertain. (Analysts’ price target is $0.52)

DON'T BUY

GUD acquires drugs (orphan drugs) and redistributes them in Canada through its own distribution channel. It has several competitors. Analysts expect lower earnings this year compared to last year. It trades at 62x forward earnings and pays a lower dividend than you can get from a bond.

BUY

Provides breathing masks and other respiratory support services. He expects significant growth and sees it as reasonably priced relative to projected earnings.