Don Lato, president of Padlock Investment Management
Focus: North American equities

MARKET OUTLOOK

After a very strong first quarter, markets have recently given up some of those gains under the influence of trade concerns. These are trying times for investors and not the time to take a strong bullish stance, but at the same time it’s also not the time to be abandoning all of your equity holdings. Investors must take a long-term view and diversify their holdings among companies with strong underlying businesses with a tilt toward including less economically sensitive sectors in their portfolios.

TOP PICKS

Don Lato's Top Picks

Don Lato, president at Padlock Investment Management, shares his top picks: NFI Group, TD Bank and Viemed Healthcare.

NFI GROUP (NFI.TO)
Latest purchase two weeks ago at $32.03.

NFI announced a major acquisition yesterday that should propel its next growth stage. NFI acquired the UK’s largest bus manufacturer, Alexander Dennis. NFI told investors yesterday that acquisition will be accretive to earnings both this year and next without considering any synergies on the operating side. Analysts have embraced the deal with generally uniform increases in their earnings estimates for this year and next. Prior to the estimate increases, the stock was already at a depressed 10.2 times this year’s earnings, well below its historical average. With last month’s dividend increase, NFI is also yielding a very attractive 5 per cent.

TD BANK (TD.TO)
Latest purchase this week at $76.30.

After surprising investors with a very rare disappointing quarter in February, TD got back in the groove last week with strong second-quarter results that surprised to the upside. The bank reported better-than-expected results from its U.S. banking operations and its wholesale operations, which were the cause of the earnings miss last quarter. For many years, TD has traded a premium to its Canadian banking peers and that continues today, but at just over 11 times this year’s earnings and a yield of just under 4 per cent, TD provides good value for your portfolio in these turbulent times

VIEMED HEALTHCARE INC (VMD.TO)
Latest purchase last week at $9.20.

Viemed Healthcare, a recent addition to the Padlock Small Cap portfolio, is the largest independent specialized provider of non-invasive ventilation (NIV) focused on chronic obstructive pulmonary disease (CPOD) in the U.S. home respiratory health care industry. COPD, a $50 billion dollar per year industry that grows with the aging population and the need to reduce health care costs by effective homecare solutions should generate many years of growth for Viemed as it grows its footprint from operating in 25 states to the entire country. Earnings per share are expected to grow from 27 cents in 2018 to 46 cents in 2020. At 20 times those 2020 earnings, this high growth company is priced very favourably.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
NFI Y Y Y
TD Y Y Y
VMD Y Y Y

 

PAST PICKS: JUNE 27, 2018

Don Lato's Past Picks

Don Lato, president at Padlock Investment Management, reviews his past picks: Roots, Gilead Sciences and Equitable Group.

ROOTS CORP (ROOT.TO)

  • Then: $10.50
  • Now: $3.84
  • Return: -63%
  • Total return: -63%

GILEAD SCIENCES (GILD.O)

  • Then: $68.64
  • Now: $63.42
  • Return: -8%
  • Total return: -5%

EQUITABLE GROUP (EQB.TO)

  • Then: $59.21
  • Now: $68.30
  • Return: 15%
  • Total return: 17%

Total return average: -17%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ROOT Y Y Y
GILD N N Y
EQB Y Y Y

 

WEBSITE: https://padlockinvestment.com