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

We are growing increasingly cautious with respect to equity markets and continue to reduce risk. The end of central bank easing, elevated equity market valuations, and low levels of volatility (implying investor complacency), collectively suggest added caution is warranted at the current time. We plan to maintain a defensive posture and focus our attention on only the highest quality businesses. While we continue to believe the U.S. economic backdrop is reasonably positive, we suspect much of this good news is now priced into equities and investors will have opportunities to deploy cash at better prices in the months ahead.  

TOP PICKS

TRICON CAPITAL GROUP (TCN.TO)

• Most recent purchase in early October at $10.30 a share
• Leading real estate investor/developer with focus on U.S. market
• Recent acquisition of Silver Bay realty is transformational and makes TCN the fourth-largest public single-family rental business in North America
• Single-family rental is a highly fragmented market with significant growth opportunities, steady cash flow, and provides a way for investors to participate in recovering U.S. residential real estate
• Trades at a significant discount to estimated net asset value of approximately $13 a share; recent pullback provides buying opportunity

POLARIS INFRASTRUCTURE (PIF.TO)

• Most recent purchase one week ago at $15.75 a share
• Developer/operator of renewable power that currently owns a geothermal project in Nicaragua
• Long-term power-purchase agreement (PPA) with Nicaraguan government – important source of power for country
• Recent drilling success has allowed company to expand production and grow cash flow
• Trades at a substantial discount to other power producers (5x EV/EBITDA, double digit FCF yield) – comparable multiples in the 8x-12x range
• Attractive dividend yield of 4.3 per cent (and low payout ratio)

GREENSPACE BRANDS (JTR.V)

• Most recent purchase a few months ago at approx. $1.45 a share
• Organic food producer with a number of attractive brands such as Central Roast, Rolling Meadows, Kiju Juice and Love Child
• Strong distribution presence in large Canadian retailers (Loblaws, Sobey’s, Wal-Mart, etc.) where organic foods continue to gain more shelf space
• Profitability will continue to improve as company gains scale
• Growing revenue and attractive brands make Greenspace an acquisition target
• Trades at approx. 1x forward EV/Revenue (compared to peers/precedent transactions at 2x or more)
   

PAST PICKS: OCTOBER 25, 2016

MAPLE LEAF FOODS (MFI.TO) - sold position from funds a couple of months ago

• Then: $30.29
• Now: $33.07
• Return: 9.18%
• Total return: 10.61%

AIR CANADA (AC.TO) - sold position from funds earlier in 2017

• Then: $12.86
• Now: $26.41
• Return: 105.33%
• Total return: 105.33%

IBI GROUP (IBG.TO)

• Then: $6.64
• Now: $7.40
• Return: 11.45%
• Total return: 11.45%

TOTAL RETURN AVERAGE: 42.46%