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| Mike Lyons CA, CFA of Lyons Asset Management | |
|---|---|
| Investment Style | value |
| 277 Lakeshore Rd. | |
| Suite 210 | |
| Oakville ON | |
| L6J 1H9 | |
| 905.844.8720 | |
| Mike Lyons CA, CFA's website | |
| info@lyonsassetmanagement.ca |
| BUY on WEAKNESS | Celestica Inc | CLS-T | 11.750 | Fairly cheap but worries about how much value they can extract, as they don’t sell the end product. Financial multiples are attractive. Not sure this is the best time after their run up. In the wrong place of the value chain as they don’t get to keep any of the economic value themselves. Seem to be doing a better job of late. | 2011-02-24 | ||
| DON'T BUY | Cisco | CSCO-Q | 18.360 | Instead of paying dividends they continue to buy back stock, which destroys shareholder value. Not sure management runs the business for the benefit of shareholders. | 2011-02-24 | ||
| Comment | General Electric | GE-N | 20.580 | If we get an economic rebound it will probably do fairly well. Doesn’t like the black box nature of GE Financials. Will probably do very well if there is an economic rebound. | 2011-02-24 | ||
| PAST TOP PICK | Johnson & Johnson | JNJ-N | 60.250 | (A Top Pick Nov 3/10. Down 5.1%.) Still Buying. | 2011-02-24 | ||
| DON'T BUY | Manulife Financial | MFC-T | 18.290 | In the event of a market correction, they might benefit because of all the hedging they have done. To him, a permanent marker against them is their error in writing unhedged insurance premiums. | 2011-02-24 | ||
| DON'T BUY | Potash Corp of Saskatchewan | POT-T | 57.060 | Have not been impressed with free cash flow. | 2011-02-24 | ||
| TOP PICK | Starbucks | SBUX-Q | 31.910 | This is an example of the kind of stock that he is willing to ride a lot longer and to much higher multiples if he believes management is outstanding. Executing extremely well on many fronts. Fully funding all their expansion and the institution of a dividend. If you feel there will be a market correction, you might want wait. | 2011-02-24 | ||
| BUY | Target Corp | TGT-N | 52.000 | Offers reasonable value. Trades for a reasonable price/sales and earnings. US retail sector is demonstrating they can make money even in this sort of environment. !.93% yield. | 2011-02-24 | ||
| DON'T BUY | Yahoo! | YHOO-Q | 16.370 | Not enthused about this one. Sells for 3 to 4 times revenue, 15 times earnings. If it was a market leader or had some special attributes, he might be willing to pay more for it but it isn’t in this category. Runs a risk of being usurped by other internet vehicles. | 2011-02-24 | ||
| Comment | Valero Energy Corp | VLO-N | 26.800 | Refining is an ugly business. Not an industry of secular growth but one of cyclical margin swings. Hard to make money at it and plants are hard to run. Sector has just had a bounce off a significant rally. Has a fair amount of debt. If dynamics for the sector continue positive for a little while, they will be more of a beneficiary than the un-levered players. (He just sold a refiner, Frontier Oil (FTO-N).) | 2011-02-24 | ||
| Comment | A Comment -- General Comments From an Expert | A Commentary | 0.020 | Market - Recent mid-east problems might be a decent catalyst for a correction in the market. Market has gone straight up since August and has been looking for a catalyst and this is a pretty big one. Market rally was significant enough and the catalyst is big enough that it could be a fairly good correction. 10% would not surprise him. Could be a few weeks or a couple of months. | 2011-02-24 | ||
| DON'T BUY | Molson Coors Brewing Company | TAP-N | 44.660 | Beer is a gradual declining industry. Too expensive given the lackluster industry backdrop. A little over 3X sales. | 2011-02-24 | ||
| TOP PICK | A. Schulman Inc. | SHLM-Q | 21.550 | A leading performer of high performance plastic resins. Decent dividend of almost 3%. Low price sales and reasonable price/earnings. 2/3 of the business is profitable European operations and 1/3 is unprofitable North American. If the new CEO can get North America up to decent profitability, there is a lot of room for earnings and margin expansion. | 2011-02-24 | ||
| TOP PICK | Brown Shoe Company Inc. | BWS-N | 14.770 | Likes the footwear industry. Very low multiple at about 25% of revenue and 11X earnings. Targeting to do about $2 a share in the next couple of years. If you put a twelvish multiple on this and get to 50% of revenues, it’s not very hard to get to $25 or $30. | 2011-02-24 | ||
| PAST TOP PICK | John B. Sanfilipop & Son | JBSS-Q | 11.760 | (A Top Pick Nov 3/10. Down 9.85%.) Still Buying | 2011-02-24 | ||
| PAST TOP PICK | Bob Evans Farms | BOBE-Q | 30.880 | (A Top Pick Nov 3/10. Up 5.96%.) | 2011-02-24 | ||
| DON'T BUY | Apple | AAPL-Q | 312.800 | Great company with great products but a great valuation. It is difficult to earn enough money to justify that evaluation consistently. Has trouble pulling the buy trigger. Companies that don't pay dividends frustrates him. | 2010-11-03 | ||
| HOLD | Bank of Montreal | BMO-T | 60.250 | Canadian banks made it through the financial crisis in much better shape than the rest of the world. Has 1.7% (half) holding. Has been sitting on the sidelines. It is still a period of uncertainty. If there is a problem it will be in credit quality of assets. | 2010-11-03 | ||
| HOLD | Bank of Nova Scotia | BNS-T | 54.250 | Canadian banks made it through the financial crisis in much better shape than the rest of the world. Has been sitting on the sidelines. It is still a period of uncertainty. If there is a problem it will be in credit quality of assets. He has a 1.7% (half) holding in BMO. | 2010-11-03 | ||
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| BUY | ConAgra Foods | CAG-N | 22.260 | Reasonable PE, a little more debt than he would like but it is on his watch list. | 2010-11-03 | ||
| DON'T BUY | CitiGroup | C-N | 4.190 | The problem with US institutions is that they are large, leveraged entitles. There are so many assets of questionable value. There is so much uncertainty as to what assets on the balance sheet are worth that it is hard to get a comfort level as to what the true book value of these institutions is. | 2010-11-03 | ||
| DON'T BUY | Ford Motor | F-N | 15.180 | Does not have a price he would buy at. There is so many problems in the industry. North American auto companies are like airlines. They have trouble making money over complete business cycles. The debts because of the unions scare him away with these companies. | 2010-11-03 | ||
| BUY | Hewlett-Packard Co | HPQ-N | 43.810 | Reasonably valued large caps. 12x earnings range. Would like a higher dividend yield. | 2010-11-03 | ||
| BUY | Intel | INTC-Q | 20.480 | Reasonably valued on an earnings basis. Very well run basis. Really likes the dividend that was instituted a few years ago and has really grown. The dividend forces the management to ensure positive cash flow. 10x cash flow – a good multiple. | 2010-11-03 | ||
| TOP PICK | Johnson & Johnson | JNJ-N | 64.190 | Large cap quality name that is reasonably valued. 3.3% dividend, 13.5x earnings. Not a lot of downside. Not enormous upside. Dividend is almost 1% above 10-year treasury. | 2010-11-03 | ||
| DON'T BUY | Manulife Financial | MFC-T | 12.900 | If they turn it around, it probably will be a good investment. Not hedging variable annuity products was an unforgivable mistake. He owns Allstate. | 2010-11-03 | ||
| BUY | 3M Co. | MMM-N | 85.300 | Large cap, high quality company that is reasonably valued. If the economy picks up, you can anticipate that their earnings will improve as well. Would benefit from a weaker US$. | 2010-11-03 | ||
| Comment | Potash Corp of Saskatchewan | POT-T | 146.210 | Gov’t blocking take-over attempt – looks like a negative for the shareholders. How valuable is the property to the company if the gov’t is going to step in and change the rules. It sends a negative signal to companies trying to buy up Canada’s natural resources. | 2010-11-03 | ||
| DON'T BUY | Potash Corp of Saskatchewan | POT-T | 146.210 | The gov’t decision is very negative for stocks in the sector. If market start to believe that no bid will go through, then it would be very negative for other companies. | 2010-11-03 | ||
| WEAK BUY | Research In Motion | RIM-T | 56.640 | He owns Nokia, which is similar in that it is a phone company, but Apple gets a much higher valuation than both and he didn’t need another name like Nokia. RIM is cheaper on a PE basis. Lack of diversification represents a risk in 10 years. Otherwise he would say this was a good investment. | 2010-11-03 | ||
| WAIT | United Technologies | UTX-N | 75.050 | Has had real rebound. It’s representative of companies that are not expensive. It is a name for his list for if we get this correction we are talking about. | 2010-11-03 | ||
| Comment | SPDR Gold ETF | GLD-N | 131.570 | Has trouble owning gold, but when every country in the world is trying to devalue its currency, this is a very attractive environment for gold. It is not more attractive than value producing companies. There is no sign that gold will change direction. | 2010-11-03 | ||
| N/A | A Comment -- General Comments From an Expert | A Commentary | 0.020 | Federal reserve in the US announced another round of QE. It seems the news was already priced in to the market. Has seen more volatility on just interest rate days. And there was the election, which could be a catalyst for the market but it could move the markets 10% in either direction in the next month starting about now. Thinks QE is a waste of time. Any company that is profitable or has a prospect of being profitable is a value investment. Stocks are pretty fairly valued. | 2010-11-03 | ||
| BUY | A Comment -- General Comments From an Expert | A Commentary | 0.020 | US $: This is not a bad time to exchange CAD$ into US$. As it approaches parity he would be quite comfortable purchasing US$. | 2010-11-03 | ||
| DON'T BUY | Tim Hortons | THI-T | 38.330 | Great company, great product. But he does not find it to be a buy at this price. Would be below $30. Owns starbucks. | 2010-11-03 | ||
| PAST TOP PICK | Sears Holdings Corp. | SHLD-Q | 71.410 | (Top Pick May 11/09, Up 28%) Controversial name. Thinks they can earn enough money to justify valuation. Has been buying more and more stock back. | 2010-11-03 | ||
| PAST TOP PICK | IShares Aero & Def. ETF | ITA-N | 57.240 | (Top Pick May 11/09, Up 40%) Every name in the defense sector that he looked at was cheap so he got this. Still very comfortable with it. | 2010-11-03 | ||
| PAST TOP PICK | Skechers USA Inc. | SKX-N | 19.600 | (Top Pick May 11/09, Up 91%) This had a strong balance sheet. It took off because of the market and because they had a hot product. Still considers it a dirt-cheap stock. | 2010-11-03 | ||
| TOP PICK | John B. Sanfilipop & Son | JBSS-Q | 13.000 | Make nuts. Small cap, thinly traded. Annual sales over 500 million. Will probably grow. Likes it for 25% sales ratio, and 6.5 times cash flow. Just finished plant expansion, which should increase cash flow. | 2010-11-03 | ||
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| BUY | 1stTr ISE Natural Gas E.T.F. | FCG-N | 17.640 | Nat Gas is interesting. He has a position in this ETF in the US. Producers can probably make a profit. Low gas prices should eventually drive consumption. | 2010-11-03 | ||
| TOP PICK | Bob Evans Farms | BOBE-Q | 29.360 | Restaurants, sausages. Theme was double dip in the summer and restaurant conditions were not good. Around 13x earnings. 1.25 times book – they own most of the land around the restaurants. | 2010-11-03 | ||
| SELL | BCE Inc. | BCE-T | 24.360 | Like a lot of the phone companies it looks reasonably valued on a PE or dividend yield basis but most of them have a lot of debt. For many years they could afford a lot of debt but now they are dicier businesses. He shies away from all telco related companies. | 2009-05-11 | ||
| DON'T BUY | Caterpillar | CAT-N | 38.430 | Good company. Has more debt than he is comfortable with, especially for this kind of company. The economy is probably going to have some kind of rebound but if it's tepid or doesn't happen, large ticket items volumes may remain at levels that approximate zero. Too expensive. | 2009-05-11 | ||
| HOLD | Enbridge | ENB-T | 37.970 | Because of extreme aversion to risks in the capital markets, there was less stampeding out of utilities. The rally off the lows looks like it is unwinding that extreme aversion to risk. Reasonably valued. | 2009-05-11 | ||
| SELL | General Electric | GE-N | 14.190 | The black box nature of GE Capital scares him. | 2009-05-11 | ||
| DON'T BUY | General Motors Corporation | GM-N | 1.440 | Thinks a bankruptcy proceeding for this company will be negative under all scenarios. Would not be a buyer of any piece of their capital structure. | 2009-05-11 | ||
| HOLD | Shoppers Drug Mart Corp | SC-T | 44.320 | Great company. Well run. Nice solid balance sheet. Thinks it is fully valued. Tends not to sell off on its own but only during a market selloff. | 2009-05-11 | ||
| DON'T BUY | iShares S&P/TSX Global Gold | XGD-T | 19.070 | Has always had more faith in that he has in gold the common stock industry. He would prefer bullying through the Spider Gold ETF (GLD-N). | 2009-05-11 | ||
| TOP PICK | Sears Holdings Corp. | SHLD-Q | 55.600 | Company is worth about $7 billion and generates over $40 billion in annual revenues. There are also hidden real estate values. Risk/reward is for a favourable given the low price that is being paid. | 2009-05-11 | ||
| TOP PICK | IShares Aero & Def. ETF | ITA-N | 41.480 | ETF on US Aerospace and Defence industry. The entire defence sector is interestingly valued. | 2009-05-11 | ||
| Comment | Visa Inc. | V-N | 65.930 | Doesn't have a firm opinion on this one but companies exposed to small and mid-ticket items will fare better than large ticket items. | 2009-05-11 | ||
| TOP PICK | Skechers USA Inc. | SKX-N | 10.200 | Shoe company. There is a lot of opportunity in the small to mid-ticket consumer sector. Companies have been beaten up and he doesn't think they face the downside risks that the larger companies do. Very strong balance sheet. Really trading for net current assets. Trades for about one third of sales and 8.5X the average 5 years earnings. | 2009-05-11 | ||
| DON'T BUY | Apple | AAPL-Q | 135.360 | Trades at about 5X sales. Very strong balance sheet but it is a very high multiple for a consumers electronic company. | 2008-01-31 | ||
| TOP PICK | Allstate | ALL-N | 49.220 | Bad times for financials but less so for insurance companies. At under $50 it is yielding a little over 3%. Have increased the dividend every year they have been public. Had started with 900 million shares but through buy-backs they are now down to about 563 million. 1.3X book and about 8X earnings makes it a good valuation. | 2008-01-31 | ||
| BUY | Bank of America | BAC-N | 44.150 | Basically believes that the banking system will muddle through this problem. A basket of these financials with the yields they’re offering can be a very effective way to invest. Buy in measured proportions. | 2008-01-31 | ||
| BUY | Bank of Montreal | BMO-T | 56.750 | Basically believes that the banking system will muddle through this problem. A basket of these financials with the yields they’re offering can be a very effective way to invest. Buy in measured proportions. | 2008-01-31 | ||
| BUY | CitiGroup | C-N | 28.170 | Basically believes that the banking system will muddle through this problem. A basket of these financials with the yields they’re offering can be a very effective way to invest. Buy in measured proportions. | 2008-01-31 | ||
| DON'T BUY | eBay Inc | EBAY-Q | 26.890 | His problem with this is he thinks it’s a busted market darling. Its biggest problem from a valuation perspective is its Price/Sales ratio. Trading at 5X sales and recent results have been disappointing. | 2008-01-31 | ||
| DON'T BUY | Ford Motor | F-N | 6.640 | Under certain statistical valuation parameters General Motors (GM-N) and Ford (F-N) always look very cheap but the balance sheets really scare him. Significant amount of debts. Also have pension and benefit obligations. When you couple that with having competition with very well capitalized and very competent companies it makes it a very tough environment for them. | 2008-01-31 | ||
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| DON'T BUY | General Electric | GE-N | 35.360 | Starting to show up on his screens, mostly because of its yield. Reasonable PE and 3.5% yield. He tends to not invest in really large companies because the law of large numbers makes it difficult for them to grow at a rapid pace. He has always been concerned about the black box of GE finance. | 2008-01-31 | ||
| DON'T BUY | General Motors Corporation | GM-N | 28.210 | Under certain statistical valuation parameters General Motors (GM-N) and Ford (F-N) always look very cheap but the balance sheets really scare him. Significant amount of debts. Also have pension and benefit obligations. When you couple that with having competition with very well capitalized and very competent companies it makes it a very tough environment for them. | 2008-01-31 | ||
| Comment | J.C. Penney | JCP-N | 47.350 | Retail sector in the US has been beaten up. It’s at levels where valuation is starting to look fairly reasonable at around 50% of revenues and 10X earnings. | 2008-01-31 | ||
| DON'T BUY | Nike Inc | NKE-N | 61.330 | A great company and not all that expensive. Trades at about 1.5X sales and 20X earnings, which is more than he would like to pay. Recent lows might have made it a good Buy. The kind of company you want to put on your Watch List. | 2008-01-31 | ||
| TOP PICK | Starbucks | SBUX-Q | 18.910 | Thinks really painful markets when combined by a stumble can create really attractive entry points. 1.5X sales and 20X earnings are multiples that he is comfortable with. Great growth prospects ahead of them. More international potential. | 2008-01-31 | ||
| BUY | Valero Energy Corp | VLO-N | 59.060 | The refining industry is a difficult one, but they don’t build any more of them. Fairly cheap on a Price/Sales and Price/Earnings level. Would prefer a high dividend yield. | 2008-01-31 | ||
| BUY | Wachovia Corp | WB-N | 38.470 | Basically believes that the banking system will muddle through this problem. A basket of these financials with the yields they’re offering can be a very effective way to invest. Buy in measured proportions. | 2008-01-31 | ||
| BUY | Furniture Brands International Inc. | FBN-N | 9.550 | Very low priced sales ratio. Just cut the dividend from $0.16 a share to $0.04 a share, which could be a sign of a turn around. Very strong balance sheet. Forecasting earnings for 2008 above what analysts were expecting. There has been insider purchases. Tremendously undervalued. Can see an upside in furniture in the next housing cycle and there will be one. | 2008-01-31 | ||
| TOP PICK | Masco Corp. | MAS-N | 22.930 | Makes products that are used in home renovations and new house construction, which is a negative news back drop right now. This and the weak market have led to a 50% decline in the share price. This is a company that’s been around for 50 years and know how to manage the housing cycles. Yield of about 4% and have increased the dividend for 48 straight years. | 2008-01-31 | ||
| BUY | Brown Shoe Company Inc. | BWS-N | 17.190 | Trades at a very low price/sales multiple. | 2008-01-31 | ||
| BUY | Foot Locker | FL-N | 13.690 | Very cheap. | 2008-01-31 | ||
| Comment | CitiGroup | C-N | 50.730 | Prefers the US banks. | 2007-07-20 | ||
| HOLD | General Electric | GE-N | 40.120 | Not certain that this stock is cheap. The market cap is approaching $400 billion making it difficult to generate excess returns. Reasonable dividend and reasonable price earnings multiple. Would not add to your holdings. | 2007-07-20 | ||
| BUY on WEAKNESS | Johnson & Johnson | JNJ-N | 61.790 | On his watch list. Nice diversified large cap situation. Decent dividend yield. A good mix of business. Would like to buy below $60. | 2007-07-20 | ||
| SELL | McDonalds | MCD-N | 52.090 | Fully valued. Generating impressive same-store sales growth. | 2007-07-20 | ||
| DON'T BUY | Rite Aid Corp. | RAD-N | 5.910 | Likes where management is going. This is a risk/reward situation and a turnaround story. Trades at a reasonable price/sales ratio, but has a lot of debt on the balance sheet. Made a large acquisition, which was too large for his liking. | 2007-07-20 | ||
| DON'T BUY | Exxon Mobil | XOM-N | 91.940 | Can’t see enough growth in the stock price in the future. Dividend yield under 2%. | 2007-07-20 | ||
| TOP PICK | Whole Foods Market Inc. | WFM-Q | 39.320 | Perfectly positioned in the long-term trend towards wealthier consumers paying more for better quality food. This one is the leader in the consumers’ mind. Likes its multiple of 1 X sales. A long-term hold. | 2007-07-20 | ||
| TOP PICK | Furniture Brands International Inc. | FBN-N | 12.620 | One of the leading furniture companies in the US. Exposed to the housing sector. Negative trading pattern. He is pretty sure the furniture industry in the US is going to have a positive period. The valuation is compelling. Deals they have a strong enough balance sheet to weather a prolonged housing weakness. | 2007-07-20 | ||
| TOP PICK | A. Schulman Inc. | SHLM-Q | 24.450 | Manufactures plastic resins. Trades for about 40% of revenues. Likes Price/Sales ratios below 50%. Strong balance sheet and decent dividend. 2/3 of its operations are European and profitable. 1/3 is N. A. and unprofitable and the company is not recognizing tax benefits on losses. Assuming they turn it around, current earnings are understated. New product line is coming out, which is not reflected in the current stock price. | 2007-07-20 | ||
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| BUY | Sears Holdings Corp. | SHLD-Q | 153.340 | One of the cheaper retailers and the Sears brand is a great brand. Just had a rough quarter, which created a buying opportunity. Sells for about 50% of revenue while Target (TGT-N) sells for about 1 X sales and Penney’s (JCP-N) is at about 85%. | 2007-07-20 |
