Investment Q&A

Q: I am looking at PJC.A as a take over candidate. My thinking is, as with the purchase of Shoppers by Loblaws, Jean Coutu has a sizeable downtown presence and while Montreal downtown is perhaps not quite as attractive as Toronto downtown, its still a quick way for a retailer to expand their urban presence, and as the Shoppers purchase showed, far cheaper and quicker than trying to do this from the ground up. My question is, is this a reasonable thesis and, perhaps more importantly, is PJC.A good enough and especially safe enough for a longer-term, patient hold, irrespective of the above thesis.

Q: I have 2 questions, feel free to deduct 2 points.

1. I would like to add SYZ and CXI to my portfolio. is this a good time to do so or should I wait for a summer pullback? How much more downside do they have. Should I buy them in my TFSA or non-regsistered? The SYZ dividend could be good for the non-registered?

2. For the IT side of my portfolio I own OTC and SHOP, and assume I'll add SYZ. I still need a 4th stock to make my tech holding complete. What do you suggest would go well with these three? Please note I recently sold Enghouse due to the amazon competition and sold CSU after its huge run the last few years, so don't want to add either of these.

Q: I have substantial capital gains in both of these companies. How exposed are they to the anticipated US actions in the softwood lumber warfare? Would it be prudent to lock in some of these gains?
Thank you for your advice.

Q: Blockchain technology appears to be a potential "game changer". In the last week, both RBC and TMX have made a commitment to use it. Could you build a case in your mind to buy BTL or ACN now? ... buy .both? Neither at this stage?

Thanks.

Q: What are your thoughts on TFII over the next 2-3yrs?

Thanks.

Q: What is your current thoughts on BLX? Do you like it at all? If so, what are your thoughts on it short term (3-6 months) and long term. Thanks

Q: Any news on the over 6% drop in stock price this morning? Thank you.

Q: Hi Folks: I am trying to get an idea of "debt" on some stocks as part of my due diligence. Since I can not find a website that shows actual debt, how reliable are
Debt to Earnings ratio (<1.5) and
Debt to Cash Flow ratios (<3)
Also, What does a negative D/CF mean?

Q: what is your take on igg. it is trading above the take out offer. should I sell or wait foe some news thanks bill

Q: The Urguay government sanctioned cannabis producer ICC is up over 32% in a month. Any good reason for this, other than pure speculation?
Len

Q: Hi team, I have held DHX for quite some time but am finally ready to move on. Can you please provide a good alternative for this in a TFSA as well as an RRSP. Thanks

Q: Hi 5iResearch team,

I currently have a position on BAM.A which represents about 4% of my portfolio. Given that it has not done much price wise over the last year or so, I was thinking of moving some money from BAM.A and put it in FSZ.

Just wondering if you agree with this move and if you do what %age of my BAM.A current holding should I move.

Cheers,
Harry

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!

Q: Since they are about the same price I am thinking about selling my FNV shares and buying an equal amount of SHOP shares. I am looking for more growth in the long term. Not worrying about sector allocation do you think this would be a wise move.

Q: Hi 5i, As one who remembers double digit interest rates, I've been wondering if and when the worm will turn again. It sounds like expectations are becoming pretty entrenched for higher rates in the US, and if that turns out to be true would expect Canada to follow with a year or two lag. Is there a typical pattern or approach that suggests which sectors and investment types benefit in a rising rate environment?

Thx for your excellent service!

Q: As a pure growth play could you please rank the following companies - NFI,CCL, ZCL.

Q: I noticed this stock is not part of the list of stocks in the summary. I hear a lot good things about this company and I'm considering it as part of my portfolio even at 114$/share. Would you consider this stock as good long term investment.

Q: Hi 5i, I noticed sometimes the gold stocks went down when gold price is up , same as energy, just my curiosity want to know why? What's the reason behind that? Thank you.

Q: Bond Proxies: Some investors do not want to own bonds, but prefer to own stocks that are considered "bond proxies"

Can you identify stocks that have these characteristics.