FOCUS: North American Large Caps and Long/Short Strategies
Market Outlook:
While we remain relatively optimistic on the outlook for the U.S. economy and are encouraged by continuing improvements in unemployment and the key housing sector, we believe market volatility will remain high in the near-term and that a cautious approach is warranted. With the recent rally in equities, overall valuation levels are at or above historic averages, and macroeconomic risks remain high. We remain concerned about a potential slowdown in China, the upcoming U.S. election cycle, and the potential for Britain to exit the E.U. With this in mind, we are proceeding cautiously with a relatively high level of cash and hedges, but are working diligently on new opportunities in downtrodden sectors and overlooked areas of the market.
TOP PICKS:
Liquor Stores N.A. (LIQ.TO)
Most recent purchase in last couple of weeks at $7.65/sh.
Largest publicly traded liquor retailer in North America – large store base in Alberta, growing in U.S. market
Stock has been depressed due to leveraged balance sheet, unsustainable dividend and Alberta exposure
Recent dividend cut creates opportunity to redeploy capital into growth initiatives
Attractive free cash flow, growth opportunities in US and through expansion of private label brands
Strong management team, 4.5% dividend yield, reasonable valuation
Uni-Select (UNS.TO)
Most recent purchase in last few days at $56/sh.
Leading distributor of automotive products in Canada, and automotive paints in the U.S.
Very strong balance sheet, and opportunity to consolidate in very fragmented businesses
Trades at sizeable valuation discount to U.S. peers
New CEO executing on growth plan
Recent pullback in share price provides attractive entry point
Neulion (NLN.TO)
Most recent purchase a month ago at approximately $.95/sh.
Distributes video content to internet enabled devices – well positioned to benefit from secular shift towards live video content across multiple devices
Top tier customers in core sports markets (i.e. NFL, NBA, NCAA, UFC)
Valuation highly compelling – 7x EV/EBITDA, zero debt, $100M in cash on b/s
Over 60 percent of shares owned by insiders – recent insider purchases
Strategic Value – only publicly traded pure-play provider of technology solution for over-the-top (OTT) – potential take-out target?
| Disclosure | Personal | Family | Portfolio/Fund |
|---|---|---|---|
| LIQ | N | N | Y |
| UNS | N | N | Y |
| NLN | N | N | Y |
Past Picks: Apr. 13, 2015
Sirius XM Canada (XSR.TO)
| Recommended at: | Now at: | Change | Total Return |
|---|---|---|---|
| $6.21 | $4.70 | -24.32% | -17.32% |
Interfor (IFP.TO)
| Recommended at: | Now at: | Change | Total Return |
|---|---|---|---|
| $17.80 | $12.72 | -28.54% | -28.54% |
Masonite International (DOOR.N)
| Recommended at: | Now at: | Change | Total Return |
|---|---|---|---|
| $68.94 | $68.00 | -1.36% | -1.36% |
Total Return Average : -15.74%
| Disclosure | Personal | Family | Portfolio/Fund |
|---|---|---|---|
| XSR | N | N | Y |
| IFP | N | N | Y |
| DOOR | N | N | Y |
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