Investment Q&A

Q: Hi,
I currently own 8 of Mawers Funds (MAW-102,104,105,108,120,130 & 150) to provide broad diversification to the individual stocks I own. I just noticed that they have a new Emerging Markets Fund MAW160. As this is a relatively new fund I know that information is limited on it but can you comment if you think this would be a suitable fund that would add further diversification to the funds I currently own and if I were to purchase it which account would it best suit i.e.- non-registered-TFSA-RRSP?
Thank you.

Q: Hello 5i,
If you had to choose between Enghouse and Open Text today which would you choose for growth over the next 2-3 years. I own a small amount of each and want to consolidate.
Thank you
Dave

Q: With the Tomahawk Missile being deployed yesterday (and possibly in the future), would RTN be a viable option to hold hold over the next 3.5 years of the Trump Presidency?

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: I am selling my DH holding in the very near future, and want to replace it with another company in the technology sector. I plan to take about a 4% position with my proceeds from the DH sale along with some additional uninvested capital. Along with my plan to increase my holding in ABT to about 2%, this move would increase my technology holdings to about 6%. I would strongly prefer to buy one company rather than two, and I am debating between KXS and OTEX. I know that KXS appears poised for further growth, while OTEX is more of a mature company, with a track record to support it. If you had to choose one, would you go with the proven entity in OTEX, or the company that appears poised for significant growth in KXS; or would you split the investment and buy both? I am trying to limit my holdings, as I have found that I had too many small positions that didn't really add to my bottom line while increasing my bookkeeping efforts. I would like to take the position some time next week, as I have learned that timing the market does not prove to be as valuable in the long run as spending time in the market. Thanks for reading, and I look forward to your response.

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: I am hoping you can recommend a good mexican etf, and should it be hedged. Thanks for all of your great work.

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

Q: On the question from Ernest concerning this company as well as all dry bulkers - posible reason that prices are moving - speculation is that rates are improving for dry bulk carriers Ardmore etc. also moved.
Slainte, Chris

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: Hello, great website by the way.. my question is directed to the US market.. I'm looking for a small/mid-cap company with a clean balance sheet and a decent growth profile.
Any suggestions? Thank you.

Q: I consider WSP and STN my core holdings but now due to excellent appreciation they represent 7% and 3% of my portfolio. ARE has been a laggard and represents 1%. With ARE should I go back to SNC which I owned in the past (upside due to the recent acquisition?) or just keep WSP and STN as the only stocks in this area?

Q: I have a significant exposure to HCG which I want to reduce. I have been slowly selling some of my HCG shares the past few years, but I incur significant gains that I must pay taxes. My average cost is less than $3.00 per share. I was thinking of buying more HCG shares to increase my average cost and then sell within the year thereby paying less taxes. Do you think this is a sound strategy?

Q: I have cash in my children's RESP which I will withdraw in September. TPH.DB.E, a convertible debenture is maturing on September30, about the time I need to do the withdrawal.It is yielding over 7% (3.5% for 6 months) much better than other 6 month returns. Now that Morguard is the majority owner do you think this provides more safety making it more likely that the debenture will be paid out at face value at maturity. Does the company have adequate resources to mature the debenture?

Q: Hi,
from your balanced portfolio holdings, at current prices, can you give your top 5 stocks you would be buying?
I plan to purchase these in my TFSA and over time will be building the portfolio to match your balanced portfolio.
Thanks for your help.
Dan

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: In my rrif another bond was called.The Advisor suggested NVU.Bep.un NWh.un I also thought AQN or ENF as a substitute with good DIV.
Besides my Bonds I own TD ,BCE.Sentry 1032 some preferreds and MFR.un (floating share)I would greatly appreciate if any of those mentioned would be a good addition or
do you have a better choice .
thanks a lot
Margit

Q: I have been holding both the above for some time, down considerably. Should I hold or sell, if sell possible replacement?? My other financials are BNS, SLF ITC. Thanks Jim

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