Stockchase Daily News RSS The Days Comments by Experts en A Comment -- General Comments From an Expert <p><span style="color: #ff0000;"><strong>US</strong> <strong>Economy. </strong></span>Has been some recent concerns that there has been some slower data in the last few months, with some of it being weather related. The very harsh winter had a negative impact on certain sectors such as transportation and retailers. His view is that the US economy is gradually getting better with unemployment coming down, corporate earnings still growing and the federal reserve still relatively supportive with a very low interest-rate policy, which he thinks will be in place for some time. Earnings really have to kick in here to propel share prices higher. Corporate balance sheets, being very healthy, companies have more cash than they know what to do with. In today&rsquo;s low interest-rate environment, for companies to be sitting on billions of dollars of cash earning a treasury bill rate, is not really doing shareholders a lot of good so he thinks there is a lot of pressure to put that cash to work. With CEOs more optimistic and feeling better about the economy, we will be seeing more and more deals for mergers and acquisitions.</p> Tue, 22 Apr 2014 00:00:00 -0400 A Comment -- General Comments From an Expert <p><span style="color: #ff0000;"><strong>US Housing.</strong></span> It seems like this has flat lined and taken a paused for a while. He sees another leg up soon. Timing is always elusive and difficult to figure out. Very simplistically many, many studies have shown that over a long period of time, the US needs about 1.3-1.5 million new homes built every year, just to keep up with population growth and immigration. Over the last several years, housing starts have been running at anywhere between 600,000 and 900,000 so not enough homes are being built to satisfy that natural demand. Thinks that over time there will have to be a reversion back to the mean and housing starts to go back to the 1.3-1.5 million range. <span style="color: #ff0000;"><strong>(See Top Picks and Past Picks.)</strong></span></p> Tue, 22 Apr 2014 00:00:00 -0400 Canfor Pulp Products <p>A large producer of softwood pulp in North America which goes into producing things like tissue paper, etc. Benefiting from current strong pulp prices and a weak Cdn$. Thinks it is going to generate a very significant amount of free cash flow over the next couple of years, in excess of $1 a share. Yield of 1.86% and there is a very strong possibility that this will be increased significantly over the next 12-18 months.</p> Tue, 22 Apr 2014 00:00:00 -0400 Brookfield Residential Property <p>A play on US housing, a trend he likes which he expects will continue to improve over the next number of years. One of the leading land development companies and homebuilders. The difference between them and other homebuilders is that they have about half their business in Western Canada, which has been very strong with the other half in the US. Almost more of a land development business where they make their profits by developing and selling lots than they do from building homes. Rising home prices in the US would lead to strong appreciation in land prices. Have about a 20-25 year inventory of lots in land, where the traditional homebuilder has only a 4-6 year inventory.</p> Tue, 22 Apr 2014 00:00:00 -0400 Corby Spirit and Wine (A) <p>Trading at a discount of 11X EBITDA versus 18X EBITDA of other companies. 3.5% dividend yield, so you get paid to wait. Undergoing a fairly major expansion in the US with their J P Wiser brand, one of the leading brands of rye whiskey in Canada. This is a really hot trend today in the spirits market. If successful with the expansion in the US, there could be a significant earnings upside. The wildcard is Pernod Ricard, the 4<sup>th</sup> or 5<sup>th</sup> largest liquor company in the world that owns 50% of this company. They might make a bid for the rest of Corbys. Yield of 3.44%.</p> Tue, 22 Apr 2014 00:00:00 -0400 Home Depot <p>Has been Buying in the last month or so. Pullback in the US market caused the share price for a lot of large caps like this, to pull back a little. Great company and trading at 18X this year&rsquo;s earnings and 15X the 2<sup>nd</sup> year out. Growing its store base at a very high rate of investment capital, and more importantly, also has exposure and leverage to a very strong housing market. Great way to play the housing market.</p> Tue, 22 Apr 2014 00:00:00 -0400 Guardian Capital Group <p>Has 2 main assets, the core asset management business which has been improving and making acquisitions in the business and has been getting better. Also, have a very large portfolio of corporate investments on their balance sheet, the largest of which by far is a stake in the Bank of Montr&eacute;al (BMO-T) and every time this moves up, this company becomes more valuable. As their asset management business improves, they can hopefully grow and make acquisitions in their core business and maybe sell down some of their BMO stake. He thinks the outlook is positive. Thinly traded, so you could look at CI Financial (CIX-T) or Gluskin Sheff (GS-T) instead.</p> Tue, 22 Apr 2014 00:00:00 -0400 Mitel Networks <p>A well-run company in a tough industry (telecom equipment) with a lot of pricing pressure. An interesting thing that happened recently is their large acquisition of Astra Technology. The combination of these 2 companies should generate a lot of synergies. This is where scale matters and cutting some costs and fat from the business will be good for shareholders and lead to significant free cash flow over the next number of years. Has been thinking about adding this to his portfolios, but share price has run up in the last few months and a slightly lower price would be interesting.</p> Tue, 22 Apr 2014 00:00:00 -0400 Alimentation Couche-Tard (B) <p>Very good business. They have been a consolidator in the convenience store/fuel station business. His concern is that the share price is quite expensive at about 19X earnings.</p> Tue, 22 Apr 2014 00:00:00 -0400 Royal Bank <p>A very high quality financial institution for a long-term investor. Very well run. Pays a nice dividend. If you are going to Buy and Hold it for a long time, you are not going to go too far wrong. Feels the US banks overall are cheaper on a valuation standpoint and have more earning potential than Canadian banks. Canadian banks are trading between 11 and 13 times earnings while US banks generally trade at 10X and have a better earnings growth profile because they are recovering from a lower base and a big improvement in housing.</p> Tue, 22 Apr 2014 00:00:00 -0400 Caldwell Partners Int'l (A) <p>A business that generally is going to benefit from a recovery in the economy. Have done a great job of expanding outside of Canada into the executive search business in the US in the last few years. As the US economy improves, the business and the number of searches they do will improve. Has a very large cash balance of about $0.45-$0.50 as share. Pays a nice dividend of 6.8%.</p> Tue, 22 Apr 2014 00:00:00 -0400 Westjet Airlines <p>Over the long-term, the airline industry has been a very bad sector for investors. This industry, particularly in the US, is going through a great deal of structural change with an immense amount of consolidation and cost-cutting going towards more efficient planes. Less price competition and more rational behaviour. There is some concern about competition and if the good times can keep happening. Prefers Air Canada, but has a positive outlook for both.</p> Tue, 22 Apr 2014 00:00:00 -0400 Bombardier Inc (B) <p>There is a lot of optimism about the C series. This is a name he has stayed away from over the years. Has been disappointing constantly and has a lot of leverage on its balance sheet. This is not an easy business.</p> Tue, 22 Apr 2014 00:00:00 -0400 Ainsworth Lumber Co. Ltd. <p><span style="color: #ff0000;"><strong>(A Top Pick April 16/13. Down 4.31%.)</strong> </span>Sold his holdings when there was a takeover offer.</p> Tue, 22 Apr 2014 00:00:00 -0400 Dundee International REIT <p><span style="color: #ff0000;"><strong>(A Top Pick April 16/13. Down 2.25%.)</strong></span> Sold his holdings about 6 months ago when he had a concern about interest rates moving higher. Still feels it is a well-run REIT. Has a lot of properties in Europe which is more of a play on what is going on over there.</p> Tue, 22 Apr 2014 00:00:00 -0400 Imvescor Restaurant Group <p><span style="color: #ff0000;"><strong>(A Top Pick April 16/13. Up 38.36%.)</strong></span> Story has only gotten better. Earnings are going higher. Have a great retail business where they sell some of their products in grocery stores. That retail initiative is a very high margin business. Well-positioned and generating a lot of cash flow. At some point, they could initiate a dividend which would be received positively.</p> Tue, 22 Apr 2014 00:00:00 -0400 Teck Resources Ltd. (B) <p>If you own, holding on is not a bad play. A pretty beaten up stock and has been an under performer for a while. Metallurgical coal business has been very tough. Also, have assets in copper which has not been great lately. One strong part of their market has been zinc, whose prices have been picking up a little. When you see an earnings release that is below expectation and the stock doesn&rsquo;t go down, it may be a sign that we are close to bottom.</p> Tue, 22 Apr 2014 00:00:00 -0400 Facebook <p>Doesn&rsquo;t follow this closely. It&rsquo;s a great business but the 1<sup>st</sup> number of quarters after their initial offering didn&rsquo;t perform that well. Expectations today are probably a little bit higher because the last few quarters have seen better results. It is tough to go against a company that has built as much value as they have over the last 10 years.</p> Tue, 22 Apr 2014 00:00:00 -0400 Walt Disney <p>A stock that has performed very, very well over the last 5 years. Recently had a bit of a setback but the market has also come back so wouldn&rsquo;t read too much into this. A very high quality company. There is more and more value being put on content and this is one of the leaders in content. A good blue-chip stock to own.</p> Tue, 22 Apr 2014 00:00:00 -0400 Alcoa <p>A very good, large cap aluminum producer levered to the US economy and into the global economy. There is a trend towards light weighting in cars as opposed to having a lot of steel in your cars. Feels it has good long-term prospects.</p> Tue, 22 Apr 2014 00:00:00 -0400 Goldman Sachs <p>Fits in the category of a very well run business. Trading at a reasonable valuation multiple. A pickup in merger and acquisition activity would benefit this company. He thinks this is going to happen.</p> Tue, 22 Apr 2014 00:00:00 -0400 Tesla Motors Inc <p>Would put this in the category of almost like a concept. Generally speaking, the electric car market is going to become more competitive. This one is clearly the early mover and the leader, but there is a lot of optimism baked into the valuation. Company has a $26 billion market cap and expected to sell 35,000 cars next year which comes out to about a $750,000 valuation per car.</p> Tue, 22 Apr 2014 00:00:00 -0400 Logistec Corp <p>Involved basically in loading cargo at ports. Have a very good position in North America. If you believe the economy is going to get better and more and more trade is going to be happening from Canada and the US, this would be a big beneficiary of that. Sold his holdings 3 or 4 months ago because it had gone up a lot and he took profits. Tightly controlled by a small number of investors so is not very liquid.</p> Tue, 22 Apr 2014 00:00:00 -0400 Bank of America <p>Preferred Citigroup (C-N) which was a little bit cheaper, trading at about 8.9X on a forward basis compared to this one at about 10X. Citigroup also has a more interesting upside on the dividend side when the Federal Reserve will give them the ability to increase their dividend. However, he likes the whole sector. As the economy and housing gets better, all the US banks should do well.</p> Tue, 22 Apr 2014 00:00:00 -0400 Tricon Capital Group <p>A Canadian company, but primarily exposed to US housing. Have a few different businesses. One is in land and housing development. Own a lot of land in California, Arizona and areas where there has been strong appreciation. Also into single-family rental business where they have accumulated a lot of individual homes and are renting them out. Thinks the outlook is very good. Excellent management team.</p> Tue, 22 Apr 2014 00:00:00 -0400 Visa Inc. <p>Wouldn&rsquo;t want to bet against this company. Has a very premium valuation trading at about 23 or 24 times earnings, so you are paying a steep price to Buy. However, you can&rsquo;t argue with the success they have had. Payment processors are benefiting from 2 big long-term trends, a move towards a cashless society and the proliferation of e-commerce.</p> Tue, 22 Apr 2014 00:00:00 -0400 Aecon Group Inc <p>Doesn&rsquo;t follow this closely, but it has performed well and if you own, he would be inclined to take profits. One of the challenges in the engineering/construction business is that it can be &ldquo;boom and bust&rdquo;. When oil/gas sector is doing well, they win a lot of contracts as well, but there are risks that when the going gets tough, they can be locked into contracts that could have costs overruns.</p> Tue, 22 Apr 2014 00:00:00 -0400 Suncor Energy Inc <p>The whole energy patch has done well so far this year. It&rsquo;s been the hot sector in Canada this year. This stock languished for a long time and feels it is still trading at a reasonable valuation. Pays a dividend. A blue chip way of getting exposure to energy in Canada.</p> Tue, 22 Apr 2014 00:00:00 -0400 Encana Corp <p>If you believe in natural gas, this is one of the really blue chip companies in Canada that participates. Recently spun off some of their more mature assets into a royalty type structure, which is part of the reason why the stock has been strong in addition to the weather we have had.</p> Tue, 22 Apr 2014 00:00:00 -0400 Alaris Royalty <p>A company that has been able to acquire cash flow generating businesses. They use their currency to make a lot of acquisitions and pay a nice dividend out over time. That outlook is still intact. Has had a pause, but long-term the outlook is positive.</p> Tue, 22 Apr 2014 00:00:00 -0400 A Comment -- General Comments From an Expert <p><span style="color: #ff0000;"><strong>Markets.</strong></span> We are getting to that time where it is &ldquo;sell in May and go away&rdquo;, but there are also the midterm elections throwing a range in the works. The average Sell date for May is the 5<sup>th</sup>, so we are approaching that time. The average decline in the summertime is a minor one at -0.02%, so it is not a given that the markets will decline in the summer. Actually 61% of the time they are positive during the summer. So the &ldquo;sell in May and go away&rdquo; is more or less a myth. It is a broad strategy in that you Sell the broad markets, and move to bonds and more defensive positions. However, there is a condition this year in that this is a midterm election year. These can cause a lot of volatility in the market between April 22 and Sept 30. Average decline for the S&amp;P 500 is almost 5% and we have seen 10 of the past 16 midterm election years have had a correction of 10% or more. There is a very high probability this year that we are going to see the typical volatility in the summer. He is not expecting an end to the uptrend, but just a pull back. It has been 30 months since we have had a correction and we are certainly due for one. He is still fully invested, but has his finger on the trigger. During the summer, he becomes defensive and does not take on excess risk. He moves into things like consumers&rsquo; staples, healthcare, utilities, things that have a yield and even bonds tend to do well in the summertime.</p> Tue, 22 Apr 2014 00:00:00 -0400 CI Financial Corp <p>Canadian financials in particular have a period of seasonal strength from January all the way through to their earnings. This one reports May 7. The big 6 report closer to the end of May so you still have a bit of time. Chart shows consolidation for the past few months so it hasn&rsquo;t really played out according to seasonal tendencies. There are better alternatives out there. Revisit financials in August.</p> Tue, 22 Apr 2014 00:00:00 -0400 Progressive Waste Solutions Inc <p>Waste management companies can do very well in the springtime with contracts coming up for the summer. They tend to do very well from March through May. Expects this one would be no different, however the chart shows a huge double top and it doesn&rsquo;t look like it is going to exceed that given the few weeks left in the seasonal period. Industrials do particularly poorly in the summertime.</p> Tue, 22 Apr 2014 00:00:00 -0400 Badger Daylighting <p>This tends to do well from March through until May. Chart shows a nice upward trend in 2011 and has gone parabolic since late 2012. You tend to want to avoid cyclical stocks during the summer.</p> Tue, 22 Apr 2014 00:00:00 -0400 SPDR S&P 500 ETF <p>Expecting a bit of weakness this summer and we are seeing stretched valuations. Nothing is cheap at the present so you want to avoid the broad markets. This one is trading at about a 17 multiple. Look for things with a lower multiple such as consumer staples or utilities which are hovering around 14.</p> Tue, 22 Apr 2014 00:00:00 -0400 iShares Dow Jones Real Estate E.T.F. <p>This is just coming to an end of its 1<sup>st</sup> period of seasonal strength. It tends to do well in the springtime, March through to May. The next period of strength is from July through to October.</p> Tue, 22 Apr 2014 00:00:00 -0400 Gilead Sciences Inc. <p>Biotech has 2 periods of seasonal strength. One is predominately during the summer from August through until October, but there is also a very minor push during the months of April and May which we are seeing now. Had a huge selloff during its seasonal weakness of February to April and had become deeply oversold. We are now into a minor period of seasonal strength, but he would look into buying this in August.</p> Tue, 22 Apr 2014 00:00:00 -0400 iShares Russell 2000 ETF <p><span style="color: #ff0000;"><strong>(A Top Pick Jan 3/14. Up 0.20%.)</strong></span> This is a great play at the start of the year. You get a big push in Jan-Feb. This year it capped out right according to queue, at the beginning of March. Period of seasonal strength is from mid-December through to the beginning of March and he made about 9% on this trade.</p> Tue, 22 Apr 2014 00:00:00 -0400 iPath DJ AIG Copper TR Sub-Index <p><span style="color: #ff0000;"><strong>(A Top Pick Jan 3/14. Down 9.51%.)</strong> </span>Copper futures. This one did not work out.</p> Tue, 22 Apr 2014 00:00:00 -0400 SPDR Energy ETF <p><span style="color: #ff0000;"><strong>(A Top Pick Jan 3/14. Up 7.82%.)</strong></span> Energy tends to do well from early January all the way through to May. Oil prices, gasoline and gas prices tend to go up at that time. The period of seasonal strength is coming to an end now.</p> Tue, 22 Apr 2014 00:00:00 -0400 Altagas Ltd <p>This tends to do well during the summer and he is not sure of the reason. Energy can do moderately well during the summer, but that is not its peak period of seasonal strength which runs from January through to May. There is a push from July through to October. This one has seemed to find that strength and shows an average gain of 8% during that time. This would be a hold through to the end of September.</p> Tue, 22 Apr 2014 00:00:00 -0400 Prometic Life Sciences Inc. <p>Biotech tends to do well in the summertime from August through until October. There is another push at the end of the year from about October into February. Seasonality for this in particular is a bit different from the biotech sector. It actually enters a period of seasonal weakness during the summer. Seasonal strength is really from the end of December through to February. Wouldn&rsquo;t be pursuing this, particularly seeing how stretched it has become.</p> Tue, 22 Apr 2014 00:00:00 -0400 Biogen IDEC Inc. <p>The period of seasonal strength comes predominately during the summertime, from August through until October. The average gain from July through to October is about 30% on an annual basis. The strongest month is July, so if you can take a position before July, it will give you added value. Currently this is trying to find a bottom. It is bouncing off of oversold levels. Doesn&rsquo;t expect you would find the bottom at this point. Wait until the summer.</p> Tue, 22 Apr 2014 00:00:00 -0400 Canadian Oil Sands <p>Has had a great move in its present period of seasonal strength and is up substantially since the year began. Substantially overbought at present levels. We are nearing the end of the seasonal strength and this follows the same seasonality. May 9 is the average exit date for the energy sector. Look to take profits on strength between now and May 9. Sit it out and then come back during the next period of seasonal strength of July through until October.</p> Tue, 22 Apr 2014 00:00:00 -0400 Potash Corp of Saskatchewan <p>Fertilizer stocks tend to do well in the summer, from July through until October. We are currently already seeing strength in the stock. Last year was a horrible year and it didn&rsquo;t play out according to trend. He would expect that this will get up to those highs that we saw last summer. Sit this one out now and entertain it more in July.</p> Tue, 22 Apr 2014 00:00:00 -0400 Ford Motor <p>Consumer discretionary stocks, particularly this one, tend to do well in the spring. There is a huge spike up from March through to May, but then we get into a period of seasonal weakness. Consumer discretionary stocks tend to do very poorly during the summer. Relative performance is still trending higher on this, so it looks like there are still investors coming into it. We are getting to the end of seasonal strength in a couple of weeks.</p> Tue, 22 Apr 2014 00:00:00 -0400 Magna Int'l. (A) <p>Auto-part makers will follow the same seasonal strength as the automobile manufacturers. From March through to May is the period of seasonal strength. We are getting to the end of seasonal strength in a couple of weeks.</p> Tue, 22 Apr 2014 00:00:00 -0400 Canadian National R.R. <p>Transportation industry is doing incredibly well right now. This one had a huge push over the last few days and is starting to outperform the market. The period of seasonal strength for transportation stocks predominantly come to an end when industrial stocks come to an end, which is the beginning of May. A good trade during the summertime is to actually Short some of these things. July through to October is the weakest time for these transportation stocks. He would be looking to take profits here.</p> Tue, 22 Apr 2014 00:00:00 -0400 Russel Metals <p>The period of seasonal strength for materials stocks is from October through to May. We have seen a huge push this year as well. Seasonal weakness for these materials stocks tends to be in the summertime. He would be looking to take profits.</p> Tue, 22 Apr 2014 00:00:00 -0400 Kellog <p>This is your classic defensive play. A consumer staples company that has a low PE of about 13 as opposed to the market which is about 17. The period of seasonal strength for this can run between now, April through to July. Consumer Staples in general can do well all the way through to October. The average gain from April 27 to October 7 is 9.18%. On the technicals, the chart shows what he would call a bit of a Bull flag. This sharpness has come on during takeover talks, but he is not playing it on this basis, but on a seasonal basis.</p> Tue, 22 Apr 2014 00:00:00 -0400 Scholastic Corp. <p>The bulk of their operating income comes in the quarter from September through to November, the start of the school season. The period of seasonal strength will obviously run from now, the end of April, all the way to September 30. The average gain for this company is 14.3%. There have only been 2 times where it has been negative in its 22 year history.</p> Tue, 22 Apr 2014 00:00:00 -0400 HAP Floating Rate Bond ETF <p>A good cash alternative way where you can hide out during the summer. This holds a basket of corporate bonds and has a floating rate attached to it, to hedge out the interest-rate risk. If bond rates and interest rates go higher, you will tend to benefit from this. A very conservative play.</p> Tue, 22 Apr 2014 00:00:00 -0400