Author: aalaik

10 May 2019

Issue 19 – The Strong gets Stronger

The portfolio is invested in what we believe to be the strongest Canadian E&P in the TSX. Our approach for the past few years has been sticking to companies with strong management teams, strong balance sheets, low decline rates, and with controlled production growth. I continue to stay away from the highly levered, high oil sensitivity companies, as the risk to reward remains high.

Disclaimer: Palos Funds are shareholders of TOG.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

06 May 2019

Issue 18 – InterRent Has Another Very Impressive Quarter

On April 29, 2019, InterRent Real Estate Investment Trust (TSX:IIP-U) announced its 2019 Q1 results and they were impressive. The company continues to deliver double digit organic growth. The REIT has now delivered this kind of growth for six consecutive quarters. The company delivered 12% NOI growth and its revenue increased by 8% QoQ . The organic growth came from an increase in the average monthly rent. Furthermore, management continues to be disciplined on cost. Operating costs were very impressive, especially that we had record cold weather in Eastern Canada.

Disclaimer: Palos Funds are shareholders of IIP-U.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

29 Apr 2019

Issue 17 – Horizon North Should Not be Ignored

Horizon North Logistics Inc (TSX:HNL) is no longer a one trick pony. Its industrial service business provides many services in camps and accommodation. However, their business is no longer at the mercy of oil sands development. The industrial services business has diversified into non-energy, liquid rich plays, and Westcoast LNG. HNL is now the largest open camp provider in the Montney/Duvernay area by market share. The North Montney will be key in supporting LNG feed stock. Palos is of the opinion that the majority of Canadian E&P’s growth in the coming years will be coming from South & North Montney/Duvernay. HNL is well positioned to capitalize on this growth.

Disclaimer: Palos Funds are shareholders of HNL.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

22 Apr 2019

Issue 16 – Lundin Defies the Skeptics

Lundin Mining Corp (TSX: LUN) has been on the prowl for acquisitions for a few years now. If you recall, LUN tried to acquire Nevsun Resources Ltd. in July 2018. However, a competitive offer came from Zijin mining of China. Analysts and investors became very skeptic about LUN executing on any acquisition. I always appreciated management’s discipline regarding M&A. They are very patient and do not overpay. On April 15, 2019, LUN announced that they are acquiring Yamana’s (TSX: YRI) Chapada copper-gold mine in Brazil for $800Mln in cash plus $225Mln in contingent payments.

Disclaimer: Palos Funds are shareholders of LUN.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

12 Apr 2019

Issue 15 – NFI Group Strong Fundamentals

NFI Group (TSX: NFI) is North America’s leading bus manufacturer with facilities across Canada and the U.S. The company pays a dividend yield of 5%, has a free cash flow yield of 12%, has 2.5 years of revenue in backlog, and has a strong balance sheet. Despite all of this, the company is down 37.5% in the past 12 months. The following factors have contributed to its decline:

Disclaimer: Palos Funds are shareholders of NFI.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

05 Apr 2019

Issue 14 – Zinc Is Running Dry

Zinc storage at the London Metal Exchange (LME) warehouse reached 12-year low in March 2019. The storage is at approximately 59,000 tones – which is only two days of global consumption. The price of zinc is up 22% since the beginning of the year. I’m of the opinion that the prices could move to last year’s highs. The question is how to invest in zinc.

Disclaimer: Palos Funds are shareholders of TECK/B and LUN.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

29 Mar 2019

Issue 13 – Savaria is Digesting

Savaria Corporation (TSX: SIS) is a company that designs, manufactures, and distributes equipment that helps with the mobility of people with special needs. The company makes vertical lifts, inclined lifts, stairlifts, and many other products that help with mobility. I believe that SIS is well positioned to help the growing aging population with mobility. SIS is a unique company that has grown as a leader in the heath mobility sector.

Disclaimer: Palos Funds are shareholders of SIS.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

25 Mar 2019

Issue 12 – Alimentation Couche-Tard When Headline Numbers are Misleading

On March 19, 2019 Alimentation Couche-Tard announced (TSX: ATD/B) its 3rd quarter results and the headline numbers gave the impression that they missed on EPS, when compared to consensus. In my view, they reported an outstanding quarter. The miss came from fuel margins, and ever since I’ve been following this stock, analysts have had a difficult time predicting fuel margins. Hence, why I focus on merchandise. On that front ATD/B reported impressive SSSG which was well ahead of consensus, especially in the U.S. The company was able to execute on their promotions, product mixes, and loyalty programs.

Disclaimer: Palos Funds are shareholders of ATD/B.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By Robert Mendel

 

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By William Mitchell

15 Mar 2019

Issue 11 – K-Bro Is Executing on the Plan

K-Bro Linen Inc. (TSX: KBL) owns and operates laundry and linen processing facilities in Canada. On March 14th , 2019, KBL announced its 2018 fourth quarter results. The company’s 4Q revenue came in at $59.4 million. They benefited from their strategic acquisition in late 2018 and from organic growth. However, as expected, margins continued to be challenged in Q4 as KBL continued to upgrade their Vancouver and Toronto facilities. It’s important to note that this was the first quarter of margin improvement from 9.4% to 11.1%, but far from their 2015 level.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By William Mitchell

08 Mar 2019

Issue 10 – Lundin Mining Getting Punished by Headlines

On March 06, 2019, BioBio, a Chilean media company, published an article stating that Lundin (TSX: LUN) is being investigated for an alleged $23.6 million bribe to Tierra Amarilla Town Hall in September of 2015. The article claims that the bribe was to avoid legal action that could hinder the approval of the Environmental Impact Assessment (EIA). When the news came out, the stock sold off aggressively, the stock hit an intraday low of $6.15.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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By William Mitchell

01 Mar 2019

Issue 9 – InterRent’s Interesting Growth

On Monday night InterRent REIT (TSX: IIP-U) announced its fourth quarter results and they were impressive. The company’s operating revenue for Q4, increased by 15% and the net operating Income (NOI) increased by 16.2%. The larger than expected NOI growth came from better revenue and operating expenses. This is bringing IIP-U 2018 organic growth to 14.7%. This does not compare to any other multi-residential REIT, they are in league of their own.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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by Robert Mendel

 

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By William Mitchell

22 Feb 2019

Issue 8 – Stelco is Pushing the Boulder Up the Hill & Important RRSP Reminder

On February 19, 2019, Stelco Holdings (TSX: STLC) announced its financial results and they were impressive in light of the US steel tariff headwinds. Revenue came in at $648 million and the adjusted EBITDA came in at $145 million and there was $23 million negative impact from tariffs. STLC also announced 22% EBITDA margins which is best in class, when compared to the whole North American steel industry.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

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by Robert Mendel

 

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By William Mitchell

15 Feb 2019

Issue 7 – Amazon & GM!!! Electric Pickup?

According to Reuters news, Amazon & GM are in talks to invest in electric pickup truck maker Rivian Automotive LLC. If the big boys move forward with this investment, it will give them a minority stake in the company. However, the big winner will be Rivian as it brings credibility to the company as well as all of GM’s manufacturing relationships and knowledge. As we know, GM has a relationship with Magna international Inc (TSX: MG) and Martinrea International Inc (TSX: MRE).

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By Charles Marleau, CIM & Joany Pagé, CFA

 

Click to Read Macro View

By Hubert Marleau

 

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by Robert Mendel

 

Click to Read Palos-Mitchell Report

By William Mitchell

08 Feb 2019

Issue 6 – The StorageVault Empire Just Got Bigger

On February 6, 2019, StorageVault Canada Inc. (TSX: SVI) announced that they were acquiring Real Storage (Real), which has 38 self-storage facilities with approximately 1.6M sq. ft. of total rental space. Most of Real’s assets are located in Ontario, including a premier facility in the GTA. I also believe there are significant synergies and operating leverage opportunities.

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Hubert Marleau

 

Click to Read Palos-Mitchell Report

By William Mitchell

01 Feb 2019

Issue 5 – Stop Loss on SNC-Lavalin Group Inc.

On January 28, 2019, SNC-Lavalin Group Inc (TSX:SNC) dropped another bomb on investors. A few years ago, SNC was being investigated for corruption and also had a failed IPO for Highway 407. This kept the valuation on SNC attractive, and the company made some strategic acquisitions that diversified their business. My investment thesis was based on valuation and management’s ability to regain investor confidence by diversifying their business.

Continue Reading in PDF

 

Click to Read Macro View

by Hubert Marleau

 

Click to Read Options Corner

by Robert Mendel

 

Click to Read Palos-Mitchell Report

by William Mitchell