Investment Q&A

Q: Could you shed any light on the most recent insider trading issue.
Do you expect a big hit? Thanks.

Q: Do you think Wildbrain's association with Youtube will be a catalyst in increasing viewership and hence increase revenue for DHX? Perhaps it's time to jump in?

Q: With roll-ups like Constellation, don't things tend to end badly? They reach a certain size and can no longer acquire enough companies to expand at 10-20% yearly, it is just an exponential mathematical equation that they cannot acquire every tech company in the known world so growth has to slow down radically eventually. CSU is competing in larger spaces with more competition and fewer companies than their classical 5-40 million revenue companies that they have acquired historically. Is this not a major concern with CSU here?

Q: The long-term chart seems to show that the downtrend is over. Going back to 2014, the stock was 12.00. Then the oil crash happenned and they suspended the 4% dividend. Today it's 4.80. I'm trying to decide if this is the time to get back in. Gold and commodity prices being up... is this what Cannacord needs to return to its previous highs? Thank you!

Q: Once the purchaser of DH acquires the common shares at $25.50, are the shares rolled into the new company or paid out? If acquired, what do you expect will happen to value of same?

Q: I have around 5% of this stock in my TFSA. The stock has been steadily declining over the last one month. Do you consider it worth holding? if so, would you advise to average at lower levels ? Thanks in advance for your advice.

Q: Hello
I want to add 2 growth stocks to my portfolio. Of the listed stocks can I please have your 2 top choices.
Thanks

Q: As it is the only company that doesn't use chemicals to get rid of caffeine, I am a believer that they can and will do better. I have a small position at present and am interested in taking on a bigger position but, I am awaiting your update due sometime this month. Any news?

Thank You,

Stephen S

Q: 2 questions on GUD:
* Recent report states " GUD also invests in funds, which have substantial assets under management in the healthcare sector..." What type of funds, private equity or mutual, and how major is this part of their business?
* Your models have 3 and 6% positions in this name, my weight is 2.5% and I'm wondering what is a suitable number, though I would be comfortable up to 5%. I am retired and it is presently my only health care stock.
Thanks, J.

Q: What would be a few names you might suggest to replace RDM ( either growth or growth plus income) Thanx Robbie

Q: I was recently reading an article about a somewhat prominent US investor who runs an extremely concentrated portfolio. I was rather startled to see that DSG was one of his choices. For example, FB was one of his other tech holdings. I would appreciate your thoughts about the long term future of DSG and why this stock may have been selected in preference to the numerous other tech possibilities. I believe the existence of a moat is a key criteria for this investor.
Thank you.

Q: I have held this stock for close to three years. It has been a good performer so I am sitting on some significant capital gains. It did miss some numbers last quarter and has recently dropped. What is your outlook for this stock and likelihood of returning to better growth.

Q: Hello! I have made a 70% return on Goeasy. It is about 5% of my stock portfolio. Should I take my profits? It seems to be ahead of itself.
Thanks,
Chantal

Q: In a reply to Tom (April 10) re CCL.B you said that the company's "growth does not look good". Please explain and expand on this comment.

Thanks, Tim.

Q: I have owned this stock for that past 2 years and watched it go down and now up, to where i am even now. How do you feel about it now, i would like to add, as i really like the real estate rental industry in the US. How is this co. valued now and is the dividend safe and how much growth in the next couple of years?
Thanks again.

Q: In your recent report on MRC you mentioned that it was trading at a premium valuation.Could you please give me the current NAV.
How are the assets of Temple Hotels valued in the NAV as well.
Thanks
Bob Rose

Q: Sorry for asking another question about SYZ, but something doesn't smell right here. It appears that a couple executives bought some small amounts of stocks (aprox $250K) late last year, which for a light trading stock like this creates some excitement and pushes the stock higher and then late January the CEO and and officer sold $7.1 millions worth of stock, just before a bad quarter and the stock drops like a rock. While maybe legal, it doesn't feel right to say the least and I don't understand how the sale went through as it trades very lightly.

Do you have any concerns about management practices? Does it point to deeper problems at the company?

Thanks M

Q: Please help me understand how an investor would go about buying some of the new shares being offered at $38.00 instead of buying existing shares on the market at today's price, most recently $40.00. If I wanted some, or in my case, more, shares of KBL, why would I buy in the market instead of the new issue?

Q: Some stocks like GSY OR RPI.UN seem to be decent performers but trade very light.Could you expand on that.

Q: Circling back on Leon's Furniture as a stable dividend paying stock with hidden potential...


Furniture business is a tough one but Leon's is likely the best operator:
- there is no shortage of tough competition in this fragmented industry: Ikea, Costco, Wallmart, Sleep Country, Superstores and partially Amazon on-line & US shopping (although only subset of their inventory like electronics as people won't buy entire dining set on-line or load in their trunk across the US border).

- on the positive, landscape is also improving: bought their biggest / most direct competitor The Brick in 2013, Target is out of Canada, Future Shop closed and Sears Home is almost bankrupt.


Checking the financials, I was surprised to find Leon's actually growing despite tough Canadian economy: 2015 SSS: +1.2% and 2106 SSS: +4.1% - but based on above, to build a conservative case, I assume no sales growth going forward.


What struck my eye in the latest company presentation on their website is the likely financial improvement to come from internal synergies left from The Brick acquisition. Two slides caught my attention:

- "1% SG&A reduction = $20M savings": classical Leon's ran at ~32% while post-Brick, it shot up to 37.5%. In 2016, it finally started coming down to 36.5% with IT systems integration late 2015. Assuming it can continue synergies and get 1% down yearly over the next 4 years, it would add $0.24 to EPS yearly ($20M/83M shares).

- "$50M per year for debt repayment": From MD&A, current debt is $240M after $50M was indeed repaid in 2016. interest at ~3% so yearly interest expense savings of $0.03 yearly ($240M/$50M = 4.8 years; $13.3M interest / 4.8 years = $2.77M and $2.77/83M shares = $0.03).

- 2016 EPS was $1.05. Even with no growth, SG&A and Interest reduction could add $0.27 in 2017 (0.24+0.03) - with same savings target over next 4 years bringing to 2020: SG&A to 32.5% (pre-Brick acquisition) and almost all debt paid, with EPS up to $2.13. Even if hit only part of these targets, there is a lot of potential internal clean-up to improve financials.


A couple of other supporting item to thesis:
- Very aligned Management as Leon family owns 67% of the stock;
- Own most of their real estate, some rumors of possible REIT spin-off last year to unlock value;
- 20% dividend increase last quarter after a few years flat;
- Insider buying (Mark Leon bought 52K shares on March 8 for ~$900K)


Now back at ~$17, valuation seems modest compared to its 10-year average. LNF seems a good value stock - flying under the radar. Is above reasonable / realistic thesis? Thanks for your comments!