Category: Weekly Commentary

05 Dec 2019

Issue 49 – Travel Message

Charles is on the road this week for meetings outside of the office. His weekly commentary will resume next week. However, please note that Hubert’s “Macro View” has been updated.

Charles est en déplacement par affaires cette semaine. Son commentaire hebdomadaire reprendra la semaine prochaine. Cependant, veuillez noter que la revue macroéconomique de Hubert a été publiée.

 

By Charles Marleau, CIM

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By Charles Marleau, CIM

 

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

28 Nov 2019

Issue 48 – Alimentation Couche-Tard is Taking Flight

On November 26th, Alimentation Couche-Tard Inc (ATD/B) announced an unsolicited CAD $8.9 billion offer to buy Australian convenience store chain Caltex. It’s notable that should this transaction be realized; Couche-Tard has the means to the finance the deal entirety with debt. However, under such a scenario we are cognizant that Couche-Tard’s balance sheet may become uncomfortably ‘stretched.’ Therefore, it should come as no surprise if the company announced their intention to raise between $1 to $2 billion in financing.

Disclaimer: Palos Funds are shareholders of ATD/B.

 

By Charles Marleau, CIM

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By Charles Marleau, CIM

 

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

21 Nov 2019

Issue 47 – Travel Message

Charles was unable to write their commentary this week as he has been in meetings outside of the office. Their column will resume next week. However, please note that Hubert’s “Macro View” has been updated.

Charles ne rédigera pas de commentaires cette semaine puisqu’il est en déplacement à l’extérieur. Vous pourrez les lire à leur retour la semaine prochaine. Veuillez noter la mise à jour de l’article “Macro View” de Hubert.

 

By Charles Marleau, CIM

Continue Reading in PDF

By Charles Marleau, CIM

 

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

14 Nov 2019

Issue 46 – Superior Surprises to The Upside

The 3rd quarter (3Q) has historically been a weak quarter, as a majority of the company’s business activity is seasonal in nature. However, Superior Plus (TSX:SPB) managed to report a strong Q3 with adjusted EBITDA of $48 million, well above the street’s consensus estimate of $35 million.

Disclaimer: Palos Funds are shareholders of SPB.

 

By Charles Marleau, CIM

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By Charles Marleau, CIM

 

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

07 Nov 2019

Issue 45 – Out of Favor, But Far from Out

It does not take a genius to know that the energy sector is out of favor. Oil & gas producers and midstream companies are currently bearing the brunt of it. Midstream companies usually have long term take-or-pay contracts with customers and provide product marketing.

Disclaimer: Palos Funds are shareholders of KEY.

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

31 Oct 2019

Issue 44 – Happy Halloween!

Dear Clients,

Charles and Joany were unable to write their commentary this week as Charles has been travelling to Toronto. Their column will resume next week. However, please note that Hubert’s “Macro View” has been updated. We hope you have a fun Halloween!

Chers clients,

Charles et Joany ne publierons pas de commentaires cette semaine puisque Charles est en déplacement à Toronto. L’édition 45 reprendra la semaine prochaine. Veuillez noter la mise à jour de l’article “Macro View” de Hubert. Nous espérons que vous avez du plaisir en cette journée d’Halloween!

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

24 Oct 2019

Issue 43 – Canadian National Railway Strong as Nails

Earnings season is back at the forefront and one of the Canadian bellwether stocks reported on Tuesday night. Canadian National Railway (TSX: CNR) reported in-line 3Q 2019 results which were driven by cost cutting and lower taxes. However, they are reducing their guidance from low double digit to high single digit EPS growth. The company is being proactive and has started to put locomotives and railcars into storage and reducing their headcount in the markets where they are seeing some softness in volumes. This is why CNR has one of the best operating metrics in the industry. Management definitely has the tools and the expertise to move quickly and efficiently. I’m very pleased to see how quickly and proactively the company is acting ahead of anticipated slower growth. It seems that the long-term vision of the company is intact as they maintained their capex guidance for 2019. CNR seems committed to continue investing in capacity, efficiency, and long-term projects. However, the company is also being prudent as they pushed their 2020 budget to December to have better visibility.

Disclaimer: Palos Funds are shareholders of CNR.

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

17 Oct 2019

Issue 42 – CCL Industries: A Value Stock?

CCL Industries Inc (TSX: CCL.B) supplies manufacturing services and specialty packaging products like labels, tubes for pharmaceutical and cosmetic products, and containers. The company has a very impressive history of making accretive acquisitions. Since its last acquisition, CCL.B has brought down its net debt to $1,755, bringing its net debt/EBITDA multiple down to 1.6x. With a balance sheet under 2x, it is probably fair to say that CCL.B is on the hunt for its next acquisition. It’s important to note that the company never issues stock from treasury; acquisitions are usually financed by its balance sheet. This means that the deals CCL does are often accretive for shareholders from day one.

Disclaimer: Palos Funds are shareholders of CCL.B.

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

10 Oct 2019

Issue 41- Maple Leaf: A Plant-Based Protein Company?

If you never heard of Beyond Meat or Impossible Foods, you’ve probably been living under a rock. Plant -Based Protein (PBP) has been making a lot of noise in the food industry and its popularity is growing rapidly. The fast food and grocer industries are all entering the market. There are many indications that meat alternatives will be a game-changer for the food industry. According to numerous reports, spending on meat alternatives is set to rise more than tenfold in the next decade.

Disclaimer: Palos Funds are shareholders of MFI.

 

By Charles Marleau, CIM & Joany Pagé, CFA

Continue Reading in PDF

By Charles Marleau, CIM & Joany Pagé, CFA

 

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

03 Oct 2019

Issue 40- Tricon Bites the Bullet

On June 11, 2019, Tricon Capital Group (TSX: TCN) closed on their US$1.4 billion acquisition of 23 U.S. Sunbelt buildings, containing 7,300 units from the Starlight U.S. Multi-Family Core Fund. For this transaction, the company issued Starlight 50.78 million shares and assumed US$916 million in debt to complete the purchase. A portion of the shares issued were subject to a lock-up. On October 2, 2019, TCN decided to remove the lock-up on 38.6 million common shares, which were issued to non-insiders in connection to the deal. This equates to 20% of its market cap.

Disclaimer: Palos Funds are shareholders of TCN.

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

26 Sep 2019

Issue 39 – Is Stelco a steel?

Stelco Holdings Inc (TSX: STLC) produces flat-rolled steel products for the construction, automotive, and energy industries. The company has fallen out favor and the stock is now trading at new lows, far from its IPO price of $17. There are many political and economic reasons why the stock is trading at these levels. The market seems to be pricing in a recession, there is a fear that the USMCA may be delayed because of an impeachment, and, of course, trade wars. Furthermore, the price of the underlying commodity is transacting below its long-term average of $630/nt.

Disclaimer: Palos Funds are shareholders of STLC.

 

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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

19 Sep 2019

Issue 38 – Northland Power Trading Opportunity

On September 9th, 2019, Northland Power Inc (TSX: NPI) announced that they are buying a Colombian power facility for $1.1 billion. NPI is funding the acquisition with equity and debt. The $315 million of equity was raised by a public offering of subscription receipts. This means that the subscription receipts will trade as receipts until the closing of the deal. This is done to protect the buyer, the seller and the existing shareholders if the deal does not go through. However, in my 20 years of experience, I have never seen a subscription receipt deal not go through. Generally, most of the due diligence is completed and what holds up the deal is delays with regulatory approvals.

Disclaimer: Palos Funds are shareholders of NPI.

 

By Charles Marleau, CIM & Joany Pagé, CFA

Continue Reading in PDF

By Charles Marleau, CIM & Joany Pagé, CFA

 

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

12 Sep 2019

Issue 37 – Boardwalk is back on The Monopoly Board

Boardwalk Real Estate Investment Trust (TSX: BEI-U) is a real estate company. The company acquires and manages multi-family residential projects throughout Canada. Multi-family residential REITS have been one of the best performing asset classes on the TSX this year. The two main reasons for this outperformance are low interest rates and population growth via record immigration. With strong population growth, demand has been outpacing supply, especially in Vancouver, Ottawa, Toronto, and Montreal. This demand has driven high single digit net operating income. This trend has gotten investors very excited and has driven stock prices to new highs. For example, InterRent REIT (TSX: IIP-U), Canadian Apartment Properties REIT (TSX: CAR-U), and Minto Apartment REIT (TSX:MI-U), all reached new highs in the past few days. With such excitement, I believe some of them got ahead of themselves especially on Price to Net Asset Value (P/NAV). BEI-U is the only one to trade at a discount to NAV. There are many reasons why BEI-U is trading at a discount and has relatively underperformed its peers in the past few years. The main reason is that BEI-U has more exposure to Western Canada than its peers. As you may recall, Alberta and Saskatchewan have not experienced the same economic expansion as other larger provinces; this is due to the energy market slowdown that started in 2015.

Disclaimer: Palos Funds are shareholders of BEI-U.

 

By Charles Marleau, CIM & Joany Pagé, CFA

Continue Reading in PDF

By Charles Marleau, CIM & Joany Pagé, CFA

 

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

05 Sep 2019

Issue 36- Travel Message

Charles and Joany were unable to write their commentary this week as Charles has been in meetings in Toronto while Joany was attending a conference. Their column will resume next week.

 

Charles et Joany ne rédigerons pas de commentaires cette semaine puisque Charles est en déplacement à Toronto et Joany en conférence. Vous pourrez les lire à leur retour la semaine prochaine.

 

By Charles Marleau, CIM & Joany Pagé, CFA

Continue Reading in PDF

By Charles Marleau, CIM & Joany Pagé, CFA

 

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

29 Aug 2019

Issue 35- Whitecap’s Dividend Just Got Stronger

Investors have been ignoring energy stocks for the past few years. This has created one of biggest buyer strikes in history. Energy stock prices have fallen to the point where companies are not able to access capital markets to fund their growth. This means that energy companies need to adapt to a new reality. Unfortunately, many companies are not able to adapt, as they struggle to keep their production flat, let alone growing it within their cashflow (CF).

 

Disclaimer: Palos Funds are shareholders of WCP.

By Charles Marleau, CIM & Joany Pagé, CFA

Continue Reading in PDF

By Charles Marleau, CIM & Joany Pagé, CFA

 

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