Investment Q&A

Q: Please comment on where 5i stands as a whole in regards to the needs for pipelines and on the Fed environment department giving a green light to build an LNG plant on Lelu island (Petronas). In regards to pipelines, specifically on ‘Energy East’ and ‘Trans Mountain’. There certainly is a lot of red tape with the Fed/Prov, Environmentalists, FN’s, etc; but isn’t it time Canada “became whole” on important infrastructure (ie. pipelines/LNG) issues to move our “trapped” resource to tide water/abroad? 5i has a very savvy investor base, a moderated forum would be a good thing to “open the floor” so to speak to hear all views on a variety of issues...

Thanks and regards,
Evan

Q: Hi; This should be a simple question. If a large firm\investment bank is underwriting an IPO or equity offering, what specifically does that entail. Is that simply the firm\investment bank selling equity to client. Is there any fiscal inputs required from the large firm\investment bank. Secondly, if the investment bank is underwriting and providing analyst coverage isn't that an obvious conflict of interest. Are there no regulations for that?

Q: Canadian Regulators are concerned about bans that cxr has imposed on the resale of their shares 14% stake to private-equity firm Cinven, who inturn resold to 60 activist firms.
Going forward will this effect the future stock performance
Thanks as usual.

Q: I am curious as to what criteria is used for selecting companies for the various portfolios.
I realize that the criteria will be different with each portfolio and its purpose but my curiosity has been peaked by a stock that has never made any of your lists.
I realize that there are a limited number of spots with a limited number of portfolios and as such you must make choices as we all do.
In my case the curiosity was peaked by NFI which I have owned going back to the good old trust unit days and while my portfolio shows that I am up 260% all of the shares that I own are really free as I have taken all of my costs off the table, so to speak and I won't be trimming my holdings of it any more.
Since I have owned and followed the company for many years other than a very brief period of concern over the lack of American municipal finding for public transit, the company has had a full order book, been profitable, increased dividends and increased in value.
Never made your reports or portfolios hence my curiosity.
I has even survived being recommended by Gordon Pape although that effect may still linger!
So why wouldn't a company like that make a portfolio?
Thanks for the great service.

Q: Because of its size BTB.UN is somewhat risky.On Nov 16 they issued $25M worth of convertible debentures which is another negative.I've done pretty well by it over the years but this latest placement makes me nervous.Would you consider selling it or selling it & buying the convertible debentures or standing pat.It is less than a 2% weighting or in my portfolio.Thanks as always,team.

Q: I read today that if I wouldn't buy the company today perhaps it is a good reason to sell. In the case of Flyht Aerospace, I have lost 74%. So just to clean up my investments a bit I thought of selling. At the same time, I have no need to sell so could hang on for several years if there was a perceived value with FLY. I see that they have changed their executive. I don't know if good or just loss of confidence in the company by their old senior executive. Any thoughts you have in terms of action I should take are appreciated.

Q: Hello 5i team
How do you see CMI facing the future? I am getting a bit discouraged as to its possibilities.

Q: Could I get your opinion of URE, they appear to be a low cost producer. Are you familiar with management.

Q: Hi guys, I have done very well with the consumer discretionary sector both in Canada & the U.S.A. My problem is that it has grown to 25% of my portfolio (each name is between 3 to 4%). What is your forcast for the sector in 2016 and should I trim now or wait until they reach 6 to 7%. Should you recommend trimming, what sector looks interesting to you to this time.

Thanks,

Jim

Q: What do you think of their Rate reset Pref Ser7. 5.5% is their offer. Came through Scotia iTrade. May not get the quantity that one requests. Worth buying? Safe for 5 years?
On an another note, I know that they will return the original 25 $ in 5 years even if it goes down. But what if the shares appreciate?

Q: Between CXR or GUD for a full new position, what would you recommend? Thanks

Q: Thinking about switching from Saputo (SAP, about a 2.5% position) to A&W. I'm a little under water on Saputo, I can use for a capital loss.

SAP is trading at around a 20-21x multiple, so in my opinion, chances of it running $3 or $4+ more in the short term is fairly limited. Plus, the Saputo family has a 34% voting interest so, I'm guessing, chances of a takeover are fairly limited in the immediate future.

These are the reason's I wouldn't mind selling SAP for a more efficient use of my funds. However, I am having difficulty valuing AW.UN in comparison with SAP. I like AW.UN's monthly dividend. I like the fact that it seems to be a well run business. And I like the fact its just about the perfect size for a large number of players in the food services industry to take them out. However, like I said, I am having difficulty valuing AW.UN. I'm wondering if you can help me out? Is it cheap, fairly valued, or expensive against the backdrop of its growth profile?

Thanks.

John

Q: Hi Peter and Team? I was thinking of buying some PPG industries which trades on the NYSE. I would value your thoughts on this company. Thank you for your help, Tamara

Q: Your thoughts on cwx?
thanks

Q: Hi Peter and Ryan, What would be an appropriate Weighted Average Cost of Capital (WACC) to use to discount GIL's future free cash flows to firm? I am getting a very low WACC estimate of only 4.41% primarily because GIL's Beta is only 0.39. My other assumptions are as follows,

Risk free rate 2.4%
Market risk premium 5.75%
Beta 0.39
2.4% + (5.75% * 0.39) = 4.64%
Resulting cost of Equity 4.64%
Equity weighting 92.1%
After-tax cost of debt 1.7%
Debt weighting 7.9%
(4.64% * 0.921) + (1.7% * 0.079) = 4.41%
Resulting WACC 4.41%

To me WACC of only 4.41% seems too low. Where do I go wrong with above calculation?

Q: Is this stock worth buying at this time? I do not need a dividend and I'm willing to wait for a capital gain.

Q: I own Encana with a loss of nearly 40 %. I'm considering taking a tax loss and replacing EnCana with Seven Generations Energy Ltd. Do you consider that to be a good move? Any better suggestions?

Q: Hi 5i team
I'm looking at adjusting my rrsp holdings
I currently hold
25,000.00 in cig837
255,000.00 in cig686
57,000 in mmf006
39,000.00 in pmo006
I'm thinking that I have to much bond exposure and would like
To move some into vgg eft to get some America company exposure
What are your thoughts
Tks for the input
Sam

Q: Can I please have your candid and honest opinion on the following which I came across recently

"Concordia Healthcare Corp. has essentially been forced to turn its entire business model on its head, according to a Bay Street analyst.
Up until September, the Oakville, Ont.-based pharmaceuticals company built its business by making a series of acquisitions that bumped up profit and revenue – in much the same way Valeant Pharmaceuticals International Inc. did. That formerly successful strategy is now in serious doubt.
“The re-valuing of the sector, coupled with Concordia’s substantial debt load, probably means the end of its financial arbitrage as a means to continue its non-organic [growth] for the foreseeable future” Doug Cooper, an analyst with Beacon Securities, wrote in a recent note to clients.
Concordia’s heavy debt burden stems from its recently completed $2.1-billion (U.S.) acquisition of Amdipharm Mercury Co. Ltd. (AMCo). Concordia was forced to fund a higher portion of the acquisition than planned with debt as opposed to equity. Only $520-million came from an equity increase. The firm had the rotten luck of conducting an equity financing smack in the middle of a stock market storm in the pharma sector. In an interview with The Globe and Mail last month, Mark Thompson, chief executive officer of Concordia, confirmed that the firm didn’t raise as much equity as it had hoped and was forced to make up the shortfall with debt.
“This [heavy debt load] has forced the company to change its strategy from a ‘growth-through-acquisition’ story to purely an internal growth story, driven by the new product launches at AMCo. ... With no imminent acquisition catalysts, we believe the shares will be range bound.”
Mr. Thompson told The Globe that the only acquisitions the firm will consider for the foreseeable future will be small, so called “tuck-in” acquisitions."

I have a current 6% position and considering some tax loss strategy. I reviewed you blog posting
Thanks

Q: A few days ago various analysts posted pretty optimistic reports on CES. Today it dropped six per cent. What is your view on earnings and the company? Is the dividend safe?

Thanks!