Full episode: Market Call Tonight for Monday, August 12, 2019
Colin Stewart, CEO and portfolio manager at JC Clark Limited
Focus: North American large caps
Equity markets gained ground in July as investors remained optimistic about modest economic growth and supportive monetary policy. More recently, equities have retreated due to fears over an escalating trade war between the U.S. and China and concerns over falling global bond yields. We continue to upgrade the quality of our portfolios with a focus on solid businesses that hold strong competitive positions and trade at reasonable prices. We are also adding defensive elements to our strategies as we expect market volatility could increase in the months and quarters ahead.
Maple Leaf Foods (MFI.TO) – Recently purchased at approximately $33 in the last few trading days
Maple Leaf Foods is the industry leader in consumer-based proteins in Canada. The company has a growing business in poultry production, Raised Without Antibiotics (RWA) meats, and Plant Based Proteins (PBP). Aggressive investments into PBP will further solidify Maple Leaf as the industry leader in North America in a rapidly growing business. MFI also represents compelling value, trading at a significant discount to its sum-of-parts value of approximately $45 per share share and a steep discount to its peer group.
Martinrea (MRE .TO) – Recently purchased at approximately $10 in the last few trading days
Martinrea is a Canadian-based automotive-parts supplier. The company is primarily exposed to North American automotive production, and focuses on structural components that benefit from the ongoing “light-weighting” trend in the auto industry. The company recently reported strong quarterly results with improving margins and significant free cash flow generation. Martinrea has a strong balance sheet, growing earnings and a 1.8 per cent dividend yield, yet it trades at only 4x earnings — its lowest valuation in over a decade.
Seven Aces (ACES.V) – Recently purchased at approximately $0.80 in June
Seven Aces is the leading operator of COAM (Coin Operated Amusement Machines) in Georgia. The company has grown aggressively through acquisition with very attractive payback economics. Our positive view is predicated on high barriers to entry, attractive margins, strong free cash flow generation, and a significant growth opportunity. Despite these attributes, ACES trades at only 4x EV/EBITDA, a steep discount to other gaming industry peers.
PAST PICKS: JULY 23, 2018
Fairfax Financial (FFH.TO)
- Then: $725.35
- Now: $600.50
- Return: -17%
- Total return: -15%
- Then: $145.70
- Now: $134.12
- Return: -8%
- Total return: -2%
- Then: $11.90
- Now: $8.80
- Return: -26%
- Total return: -20%
Total return average: -12%
FUND PROFILE: JC CLARK FOCUSED OPPORTUNITIESE FUND
Performance as of July 31, 2019:
- 1 year: 4.6% fund, -0.2% index
- 3 years: 5.2% fund, 4.0% index
- 5 years: 1.9% fund, 1.4% index
Returns are based on reinvested dividends, net of fees and annualized