Answers to popular stock and investing questions this week

Chris White Sep 16, 2019

Popular Answers to Member Questions 

Question 1: I would appreciate your view on the sale of Dream Global REIT (DRG.UN) to Blackstone. I'm a long-term holder, so not a bad move, yet the premium seems rather small, in the high-teens.

Will there be a competing bid, in your estimation, given the small premium? Aside from that, is there a projected closing timeframe?

Answer 1: At roughly 18%, we think it is a decent enough premium. With the concentration in Europe, we also don't know that there will be a whole lot of demand where other potential bidders see a need to get into a bidding war with Blackstone. Management expects the deal to close in December 2019.  With that said, we do not see a whole lot of risk in holding on to the shares in case another bid does come or in case Blackstone needs to sweeten the offer.  

Question 2: The new plant Inter Pipeline Ltd (IPL) is building is, I think, going to produce a product that is used for the manufacture of plastic. With the current drive to ban or reduce plastic use could this turn out to be a white elephant?

Answer 2: IPL's facility is going to make plastic pellets from propane.  The pellets are used to build every day consumer plastic products such as bottles and toys. The plastics ban is just in Canada, and is for single use products. There may be some impact, but we do not think it will be material to the company. 

Question 3: Any idea for the big bump in Methanex (MX) this morning?

Answer 3: With the jump in oil on the Saudi oil disruption, Methanex is seeing a bump as well as it can track energy prices.

Question 4: With the next change in cannabis coming October 17, are there a couple stocks you would recommend and a couple to stay away from? The hype on the industry appears overdone currently.

Answer 4: The sector is coming back to reality, and we are not so sure that edibles etc. are going to create much more sector interest. This party might be over, with regulatory issues (TRST) and big disappointment in growth (WEED and others). Cronos Group (CRON) seems well positioned in edibles. Aurora Cannabis (ACB) may also be of interest. We think any company sub $500M market cap is likely more vulnerable as larger companies, especially those with partnerships (and cash) will likely continue to have an advantage.

Question 5: What sectors are best for stagflation?
What sectors performed best during the 1970s?

Answer 5: Stagflation (high inflation and low growth) is one of the worst economic scenarios. Few sectors will do well. In 1970s, inflation was largely brought on by high oil prices, so that sector fared OK. Health care, utilities and consumer durables (i.e. food) are sectors that would likely do best in a return to stagflation. 

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Disclosure: The author does not hold positions in any stocks or funds mentioned.



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