Category: Weekly Commentary

15 Aug 2019

Issue 33- Savaria Is Recovering from The Garaventa Indigestion

It has been almost 1 year since Savaria’s (TSX:SIS) acquisition Garaventa Lift took place. The business was acquired based on an annual $8.3 million EBITDA. In the first six months following the acquisition, Garaventa delivered $5.3 million EBITDA, also including a seasonally weak Q1. Their EBITDA margin also improved from 7.5% in 1Q19 to 9.5% in 2Q19. That being said, it is clear that management synergies and efficiency plans are working.

 

Disclaimer: Palos Funds are shareholders of SIS.

By Charles Marleau, CIM & Joany Pagé, CFA

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By Charles Marleau, CIM & Joany Pagé, CFA

 

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By Robert Mendel

 

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By William Mitchell

08 Aug 2019

Issue 32- Badger Slips on Wet Weather

Badger Daylighting Ltd. (TSX: BAD) reported a disappointing Q2. However, the miss can be blamed almost entirely on bad weather. The Great Lake, Midwest and Ohio Valley regions experienced higher than average precipitation levels. Unfortunately, it led to revenue and operating inefficiencies and scheduling issues. The good news is that this seems to be an issue isolated to Q2 as the company kept their full year EBITDA guidance intact between $170-$190M.

 

Disclaimer: Palos Funds are shareholders of BAD.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

01 Aug 2019

Issue 31- Nutrien More Resilient

If you recall, spring weather in North America was awful. It felt like summer would never arrive. The cold wet weather led to the worst US planting season in history. Nitrogen and Potash ended up doing much better than the street anticipated. However, retail and phosphate lagged because of the delayed planting season.

 

Disclaimer: Palos Funds are shareholders of NTR.

By Charles Marleau, CIM & Joany Pagé, CFA

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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 Jul 2019

Issue 30- Magna Is Going Electric

On July 24, 2019, Magna International Inc (TSX: MG) announced the signing of its first complete vehicle manufacturing joint venture in China. The JV is significant as it has the capacity to assemble 180,000 vehicles per year. The initial production of electric vehicles is expected to start in late 2020. The JV is between MG and Beijing Automotive Industry Holding Co Ltd (BAIC) and is a significant milestone for both companies. The JV will have the capability to offer EV Manufacturing contracts to many different customers. I’m of the opinion that this is only the start of many more JV facilities in China.

 

Disclaimer: Palos Funds are shareholders of MG.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

18 Jul 2019

Issue 29- Investing in Population Trends

The growth rate of the world population is accelerating at an incredible speed. It took thousands of years for the global population to hit 5 billion; this happened in 1987. However, it only took 32 years to reach close to 8 billion people. Another noteworthy stat is that globally, people over 65 years of age now outnumber children under 5. People are living longer, but they are having less children.

 

Disclaimer: Palos Funds are shareholders of IIP-U, MI-U, TCN, SVI, MFC, SIA, and PLC.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

11 Jul 2019

Issue 28- Alimentation Couche-Tard’s All Star Year

Alimentation Couche-Tard’s (TSX: ATD.B) year-end was on April 28th, 2019. On July 9th, they released their full year and Q4 results. ATD.B had a strong year with adjusted EBITDA growth of over 18%, and EPS growth of 27%. However, Q4 was a bit more difficult as the company’s EBITDA and EPS contracted, when compared year over year (yoy).

 

Disclaimer: Palos Funds are shareholders of ATD.B.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

04 Jul 2019

Issue 27- Dollarama Goes to Latin America

On July 2nd, 2019, Dollarama (TSX: DOL) announced that they exercised their option to acquire 50.1% of Dollarcity. This acquisition will establish the next growth era for DOL. The purchase price is approximately US$90M and is expected to close in August 2019. The transaction is immediately accretive to EPS. Dollarcity has lower margins, however I see this as an opportunity for DOL.

 

Disclaimer: Palos Funds are shareholders of DOL.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

27 Jun 2019

Issue 26- Tidewater is Moving Forward

On June 21, 2019, Tidewater Midstream and Infrastructure Ltd (TSX: TWM) announced that it had completed the Pioneer Pipeline; a 50/50 joint venture with Transalta Corp (TSX: TA). The Pioneer project is significant for both companies, as it will transport natural gas from the TWM Brazeau River gas plant to TA’s electric generating units at Keephills and Sundance.

Disclaimer: Palos Funds are shareholders of TWM & TA.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

20 Jun 2019

Issue 25- Capital Power Keeping It Clean

Capital Power Corp (TSX: CPX) is a North American power producer that owns 6,300 megawatts (MW) of capacity, including announced acquisitions and projects under construction. They develop, own, and operate power generation facilities using many energy sources such as gas, coal, solar, and wind. They also own a highly contracted portfolio of assets with an average age of 15 years with only 3% expected to retire in the next decade.

Disclaimer: Palos Funds are shareholders of CPX.

By Charles Marleau, CIM & Joany Pagé, CFA

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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

13 Jun 2019

Issue 24- Superior Plus Shifting Its Focus

On June 6th 2019, Superior Plus Corp (TSX:SPB) announced that they are looking to sell their specialty chemicals division. The chemical division manufactures sodium chlorate, caustic soda, and a few other
chemicals. If the transaction gets completed, it would have a significant positive impact on SPB’s balance sheet.

Disclaimer: Palos Funds are shareholders of SPB.

By Charles Marleau, CIM & Joany Pagé, CFA

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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 Jun 2019

Issue 23 – The Month of May brings Volatility

The month of May has been volatile as the markets have been whiplashed by yet another wave of trade fears and tariffs. The China & US trade deal is taking longer than expected and has turned into a blame game. However, it is in the interest of both nations to find a common resolution on trade. We will have more information on June 28 and 29, when both nations are expected to meet at the G20 summit in Osaka.

Disclaimer: Palos Funds are shareholders of MRE, LNR, MG & TECK

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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

30 May 2019

Issue 22 – A Premium Holding

On Wednesday May 29, we had the chance to sit down with George Paleologou, the CEO of Premium Brands Holdings Corp (TSX: PBH). PBH is a food processing company that is renowned for its sandwich, meat, protein and seafood products. As the name implies, they pride themselves on having a collection of premium brands, with premium products containing quality ingredients. There is a lot to like about PBH. They have a dividend yield of 2.5%, their net debt to EBITDA on 2019 estimated exit numbers is now about 3x (their comfort level is 4-4.5x), and they grew their adjusted EBITDA over 60% in just 2 years.

Disclaimer: Palos Funds are shareholders of PBH.

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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

23 May 2019

Issue 21 – The Handcuffs are Off

On May 17, 2019, the Canadian and US governments announced their decision to eliminate steel and aluminum tariffs. A company that I believe will significantly benefit from this phenomenon is Stelco (TSX: STLC). The elimination of tariffs should increase the company’s annual EBITDA by approximately $60 million.  When the tariffs were initially introduced on May 31, 2018, STLC’s EBITDA was impacted by approximately $90 million

Disclaimer: Palos Funds are shareholders of STLC.

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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

17 May 2019

Issue 20 – Keyera Is Looking Forward

On May 15, 2019 Keyera Corp (TSX:KEY) announced it’s Q1 2019 results. The results by themselves were not spectacular because of their marketing business. The company encountered an unplanned 17-day outage at Alberta EnviroFuels, which resulted in lower ISO-octane contribution.

Disclaimer: Palos Funds are shareholders of KEY.

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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

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