PAST PICKS: JUNE 10, 2016

CALLIDUS CAPITAL (CBL.TO)
Callidus is Canada’s only listed asset-backed lender. It lends to distressed companies that would not get lending from banks. About two years ago, the CEO announced a four-part plan to correct the mispricing of its shares: dividend; share buyback; substantial issuer bid; and privatization. The CEO has delivered on the first three stages; an announcement on the fourth was expected in June. While we are disappointed by the delay, we believe the CEO is firmly committed to taking the company private as quickly as possible, and CBL reiterated the $18 to $22 valuation range. With an eight per cent monthly dividend yield and 24 per cent to 50 per cent near-term upside, we’re prepared to wait for the privatization.

• Then: $14.88
• Now: $14.32
• Return: -3.76%
• TR: +3.42%

SHORT: CANADIAN WESTERN BANK (CWB.TO)
The Great Recession of 2008-09 officially started in Q2 of 2008. At that time, CWB had gross impairments of 0.50 per cent of its loan book. It took eight more quarters for loan impairments to peak — at a level three times higher than when the recession started.  t took 17 more quarters (i.e. 4.25 years) for loan impairments to return to pre-recession levels. The Western Canada oil-and-gas recession started in Q2 of 2015. Arguably, this downturn has hit Western Canada harder and for longer than in 2008. Our view is that the market is not fully recognizing the long impairment and provision cycle that lies ahead for CWB.

• Then: $26.55
• Now: $27.78
• Return: -4.63%
• TR: -9.11%

SHORT: AGT MANAGEMENT (AGFb.TO)
Trends such as passive investing, ETFs and robo-advising are all putting pressure on the traditional mutual fund business model. We feel the industry will continue to face challenges as they adapt to more competition and lower fees.

• Then: $5.08
• Now: $6.98
• Return: -37.40%
• TR: -47.16%

TOTAL RETURN AVERAGE: -17.61%