Category: Weekly Commentary

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

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