Full episode: Market Call for Friday, May 17, 2019
Robert McWhirter, president of Selective Asset Management
Focus: Canadian dividend and small-cap stocks
Our market outlook for the April 29 Market Call noted “From a technical analysis perspective North American equities appear to be over-bought. We are entering the classic sell in May and go away period. Will this be a significant pull back or more of a rotational affair?”
That question was quickly answered on May 5 when U.S. President Trump raised the tariffs to 25 per cent on US$250 billion of Chinese goods. Equity markets around the world moved lower on concerns of further escalation of the China-U.S. trade dispute.
Technical analyst reports are showing a seven per cent potential downside risk. However, they are also showing that U.S. stocks are trading at a 20 per cent discount relative to their 35-year average price to free cash flow (P/FCF) multiple.
EXCHANGE INCOME CORP (EIF.TO)
It’s a diversified, acquisition-oriented corporation focused on opportunities in aerospace and aviation services, equipment and manufacturing. The $50.00 average target price of the 11 analysts that cover EIF implies 30 per cent potential upside.
GILDAN ACTIVEWEAR (GIL.TO)
Gildan makes t-shirts, fleece, sport shirts, underwear, socks, hosiery and shapewear. Technical analysts are highlighting indicators that the stock has a 30 per cent potential upside.
MICROBIX BIOSYSTEMS (MBX.TO)
The enterprise value manufactures over 30 viral and bacterial antigens and cell, culture-based biological products used for medical testing. Over the past two years MBX has spent $3 million for efficient bio reactors which will increase three times capacity and are expected to boost annual bottom line profitability by $1 million by the end of 2019. Combined with the $1.56 million of Q2 annualized net income gives a cheap 13.3 times price-to-earnings exit 2019 run rate ($2.56/$34 million fully diluted market cap).
In February I joined the CDC’s HPV webinar to hear Jason Mendelsohn’s story of his HPV oral cancer battle. MedX Health’s FDA approved light therapy speeds post chemo tissue healing for HPV oral cancer patients. Microbix could do ISO 13485 self-affirmation of controls for three HPV strains with the annual potential of one million HPV tests leading to potential additional recurring income of $0.8 million per year.($0.4 million in 2020).
It is my and my family’s third largest individual equity holding.
PAST PICKS: MAY18, 2018
CANADIAN NATURAL RESOURCES (CNQ.TO)
- Then: $48.16
- Now: $36.92
- Return: -23%
- Total return: -21%
TFI INTERNATIONAL (TFII.TO)
- Then: $38.15
- Now: $44.45
- Return: 17%
- Total return: 19%
WASTE CONNECTIONS (WCN.TO)
- Then: $96.46
- Now: $127.92
- Return: 33%
- Total return: 34%
Total return average: 11%
Canadian Dividend Strategy
Performance as of: April 30, 2019
- 1 month: 2.8% fund, 3.2% index
INDEX: TSX Composite.
Returns are based on reinvested dividends, net of fees and annualized.
TOP 5 WEIGHTINGS AND HOLDINGS
- Aecon Group: 4.9%
- Waste Connections: 4.8%
- Badger Daylighting: 4.5%
- Rogers Communications: 4.4%
- First Service: 4.3%