Fabrice Taylor, publisher of the President’s Club Investment Letter
Focus: North American equities

MARKET OUTLOOK

If you forgot to buy FAANG and marijuana stocks, you’re probably not doing very well. These two groups are sucking a lot of money out of other sectors and leaving some investors in the dust. Beyond that, it’s late in the cycle and harder to find value. But it’s not impossible. Pipeline and oil and gas stocks sport, in some cases, pretty attractive dividend yields. The stocks may not do much in the short-term, but at least the yield will provide some return. It’s the same with banks, which have perked up lately. At some point, the money will flow back into companies that produce lots of cash and those stocks will do better. Picking away at them now is probably a good idea. 

TOP PICKS

MTY FOOD GROUP (MTY.TO)

MTY Food trades at a relatively low price-to-earnings multiple and while there isn’t lot of organic growth, the company has expanded successfully by acquisition. I think this will continue, which will drive earnings higher, and that perhaps the multiple will expand, driving the stock price higher yet. The Kahala acquisition was made partly in stock and the sellers are savvy investors. They see upside and know this industry better than me. Latest purchase was at $52 in March. 

VERMILION ENERGY (VET.TO)

As a mostly international energy company, Vermilion enjoys better pricing than most Canadian producers. The company recently made an acquisition that the market didn’t love, but I think management deserves the benefit of the doubt. The dividend yield is attractive at almost 7 per cent and many analysts like it. The stock traded as high as $50 earlier this year and it tends to bottom around $40. Latest purchase was in August at $41.

AECON (ARE.TO)

Aecon is an engineering and construction firm. The stock sold off recently after a failed takeover attempt by a Chinese company, but subsequent results have propped it up. Canada has a huge infrastructure deficit that should benefit Aecon and other firms. The federal Liberals have a big infrastructure budget that they’ve been slow to deploy. The backlog currently sits at an all-time high and the valuation on a forward basis is not rich. I last bought in July at $15.50.

PAST PICKS: AUG. 21, 2017

CANADIAN NATURAL RESOURCES (CNQ.TO)

I still own CNQ’s stock because notwithstanding the politically induced problems in the Canadian oil patch, prices are healthier and the company has been opportunistic in acquiring assets. Further, much of its big capital spending is coming to an end, which should mean bigger dividends. 

• Then: $38.00
• Now: $42.76
• Return: 13%
• Total return: 16%

COLABOR GROUP (GCL.TO)

I like to think that I wasn’t wrong, but rather early, in investing in this classic turnaround story. Although the business continues to suffer, Colabor Group has brought in new management to solve the nagging problems plaguing it, especially in Ontario. I still believe that in a couple of years, this could be a $3 to $4 stock and that there’s a multi-year opportunity for investors. 

• Then: $0.95
• Now: $0.40
• Return: -58%
• Total return: -58%

STINGRAY DIGITAL GROUP (RAYa.TO)

I no longer own the stock. I sold it when the company acquired radio stations in the East. I don’t understand the rationale behind this move and don’t think land-based radio has a bright future.

• Then: $8.70
• Now: $9.25
• Return: 6%
• Total return: 9%

Total return average: -11%