JMRD Market Observer for November 17th 2017November 17, 2017
In This Week’s JMRD Market Observer
NBF Economics and Strategy Morning Comment – Canada: Money Klutzes
Sprott Energy Monthly Update
JMRD Investment Beliefs
JMRD Basket Corner
Reads of the Week
NBF Economics and Strategy Morning Comment – November 14, 2017
Canada: Money klutzes?
Clients have asked us to comment on a front-page column in last week’s Globe and Mail. According to this piece, Canadians are financial illiterates who borrow money “despite weak economic growth that has kept a tight lid on income growth”
We beg to differ. First, the growth of full-time employment has been stellar in the last 12 months. The country has created 400,000 full-time jobs over the past year, the best performance in two decades.
Below is the Sprott Energy Fund Commentary for October. We think this is a timely note on the evolving bullish fundamental developments for oil, Q3 results and company insights, how the fund is positioned, and a look at the industry challenges and the historical level of apathy towards the sector.
JMRD Investment Beliefs
Just in case you missed reading the Market Observer the past couple weeks, over the summer months, the principals of the JMRD Team, who form the JMRD Investment Committee, set about to articulate our Team’s investment beliefs. We have been a Team for over 10 years and largely have the same investment views. However, with added members to the Team and an ever changing investment world, we wanted to dig deeper into our key beliefs. Our team has processes in place and holds regular strategy conference calls in order to improve our investment decision-making process. We feel that testing and confirming our investment beliefs provides the solid foundation on which to make important investment decisions on an ongoing basis.
Belief #6 Investing grades are never 100 per cent. We expect to make mistakes but the key is to minimize the impact of those mistakes.
JMRD Basket Corner
Algonquin Power (AQN) – International expansion could support dividend growth. A 25% investment in Atlantica Yield (ABY) and JV with Abengoa (AAGES) marks AQN’s first step into the international fray. We believe international expansion was a good next step, but there could have been an added layer of risk if it was done independently. By entering into a JV with an existing international player, this should decrease risk and bring about new opportunities, supporting its dividend growth target of 10%/yr in the near term.
All-Cap Growth Basket
Enercare (ECI) – Enercare grows in Q3 despite weather headwinds, moves toward connected home offerings John Macdonald, president and CEO of Enercare was interviewed on BNN this week to talk about how the company handled the headwinds of mild weather and Hurricane Irma impact in Q3 earnings. He also talks about the company’s plans for “connected home” offerings.
Jamieson Wellness (JWEL) – Canadian vitamin-maker bucking bad IPO trend, could get a boost from the flu
Premium Brands (PBH) – Q3 2017 results impacted by one-time events. Revenues of $558 mln (NBF: $575 mln) due to poor summer weather in QC/ONT and delays in sales initiatives such as a significant lead order at PBH’s new sandwich facility affected top line by a combined $20-30 million. Coupled with a 20 bps drop in EBITDA margins due to higher facility and commodity costs (which have since eased) resulted in EBITDA of $49.5 million, below our $54 million forecast (Street: $55 mln). See the full article
Savaria Corp (SIS) – Savaria provided guidance for 2018e: revenues are expected to be $260 million excluding any contributions from future acquisitions, which implies aggregate organic growth of +20%. EBITDA is expected to be between $42 mln and $44 mln, which implies margins of 16.2% to 16.9% in FY2018e. Though the guidance is aggressive, given management’s track record (see Figures 1 and 2), we believe management has established sufficient credibility to support these figures. See the full article
U.S. Growth Basket
Applied Materials (AMAT) – Chip gear maker Applied Materials posts strong results, forecast
Broadcom (AVGO) – Broadcom’s Tan Got His Way on Deals; Then He Targeted Qualcomm
Marriott (MAR) – Marriott Merger Gets Four Out of Five Stars
Owens-Corning (OC) – Owens Corning held its investor day on Thursday which focused on the fundamental changes to its business and how these should drive greater shareholder value. Over the last several years, management has invested in new products, end markets and geographies, adding to its scale. Its most recent acquisitions – Pittsburgh and Paroc – add to its global platform across the segments. Credit Suisse expects the company to leverage this operational base and the gained knowledge and talent to pursue value-enhancing growth opportunities, supporting its earnings and cash flow trajectory. They look for this to be reflected in the multiple, driving upside to the current valuation. On Friday, the shares were trading at a year high of $85.50
PayPal (PYPL) – PayPal Holdings Inc said it would sell its $5.8 billion-worth U.S. credit portfolio to Synchrony Financial and raised its current-quarter revenue and profit forecasts, sending the company’s shares to a record high. PayPal’s shares rose as much as 4.43 percent to $77.94 on Thursday, up 6% on the day.
Vail Resorts (VAIL) – Billionaire investor Ron Baron on the sky resort that made him $1 billion
Reads of the week
Monday November 20th – Manufacturing PMI (US)
Tuesday November 21st – Wholesale trade sales (CAD), Existing home sales (US)
Wednesday November 22nd – Initial jobless claims (US)
Thursday November 23rd– Retail Sales (CAD), US Thanksgiving US market closed
Friday November 24th – Corporate Profits (CAD),
Monday November 20th – None
Tuesday November 21st – George Weston Ltd, Dollar Tree Inc, Hewlett Packard Enterprise Co, salesforce.com Inc
Wednesday November 22nd – Metro Inc, Deere & Co
Thursday November 23rd– US Thanksgiving US market closed.
Friday November 24th – None
Categorised in: JMRD Updates