Colin Stewart, CEO and portfolio manager at JC Clark Limited
Focus: North American large caps 

MARKET OUTLOOK

Equities have remained resilient despite growing evidence that we are late in the economic/market cycle. Slowing economic growth, elevated equity valuations and growing geopolitical risks all warrant a somewhat more defensive approach. As we move towards the later stages of the economic cycle, we are focused on identifying high-quality companies that are less economically-sensitive and adding portfolio hedges.

TOP PICKS 

GREAT CANADIAN GAMING (GC:CT)
Last purchased approximately one week ago at $40.95.

• Great Canadian Gaming is a leading Canadian casino operator with strong positions in B.C. and a monopoly-type position in GTA gaming market.
• Long-term licences in protected markets create high barriers to entry.
• The GTA gaming market is very underserved and Great Canadian is in the process of building out two brand new casinos (Pickering and Woodbine).
• It has strong free cash flow generation, with the company actively buying back stock (it has repurchased 5 per cent of outstanding shares year-to-date)
• The valuation is attractive for a high-quality, recession-resistant business at 8.2 times 2020 enterprise value to earnings before interest, tax, depreciation and amortization (EV/EBITDA).

HAMILTON THORNE (HTL:CV)
Last purchased approximately one week ago at $1.05.

• Hamilton Thorne is a leading supplier of products and services in the IVF (in-vitro fertilization) market to customers across the globe.
• Long-term industry trends are very positive. Changing demographics and delayed family formation trends globally are increasing the need for IVF. The trend towards corporate/government medical insurance coverage for IVF procedures is likely to drive growth.
• Hamilton Thorne is exhibiting double-digit organic growth and continues to grow actively via acquisition.
• The highly fragmented IVF supplier market creates a long runway for the company to consolidate the market.
• Hamilton Thorne’s largest global competitor, Vitrolife AB, trades at 30 times 2020 EV/EBITDA. Hamilton Thorne trades at only 11.8 times 2020 EV/EBITDA. 

FAIRFAX INDIA (FIH-U:CT)
Last purchased in early November at $11.52.

• Fairfax India is an investment holding company managed by Fairfax Financial that invests across a range of public and private corporations in India.
• Long-term trends in India are very positive: it’s the largest democracy in the world, the fastest-growing developing economy globally and it has a pro-business government following the re-election of Prime Minister Narendra Modi. The country also recently reduced corporate tax rates, it’s pushing to attract foreign investment and has excellent demographics.
• Fairfax India holds a concentrated portfolio of investments across a range of industries, including shipping, airports, wealth management, industrials and banking. Its crown jewel is a majority ownership stake in Bangalore International Airport, India’s third-largest airport.
• Fairfax’s deep investment expertise and strong relationships in India should provide strong deal flow and access to attractive investment opportunities.
• Despite the positive long-term outlook, Fairfax India is currently trading at a 12-per-cent discount to its current book value.

PAST PICKS: NOV. 19, 2018

GREAT CANADIAN GAMING (GC:CT)

• Then: $50.38
• Now: $41.63
• Return: -17%
• Total return: -17%

INFORMATION SERVICES CORPORATION (ISV:CT)

• Then: $16.15
• Now: $15.77
• Return: -2%
• Total return: 3%

WATERLOO BREWING (WBR:CT)

• Then: $3.36
• Now: $3.07
• Return: -9%
• Total return: -6%

 Total return average: -7%