May 4, 2021 – fr

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May 4, 2021 – fr


Brian Madden, Senior Vice President and Portfolio Manager at Goodreid Investment Counsel
FOCUS: Canadian equities


MARKET OUTLOOK:

First quarter earnings results are in full swing for Canadian businesses and, compared to last year’s lows, earnings growth is exceptionally strong, with the median company beating expectations by more than 5% and index earnings as a group about to grow closely. 80% compared to Q1 2020 levels. Growth is broad across all sectors, with the only major points of differentiation occurring between sectors and stocks experiencing triple-digit growth (energy, materials), double-digit growth (most sectors) and single digit growth (commodities, telecommunications). Against this backdrop, many stocks hit new 52-week highs on a daily basis, as did the S&P TSX itself, and very few stocks (virtually none) hit new lows.

Devils supporters might point out that rising interest rates are the fly in the ointment that could derail the rally, but with 10-year Canada bond yields barely 1.5% and barely back to levels As of the end of 2019, we are not convinced that this bull market is about to die out. Likewise, the S&P TSX Composite Index trading at a fairly neutral multiple of 16.4x expected earnings over the 20-year average of 14.8x, and with generous fiscal stimulus soon on the way. to meet the pent-up demand of newly vaccinated Canadians for the ultimate. things in life that have been off limits for over a year, we don’t think prices are ahead of themselves despite the phenomenal rally in stock prices this year.

TOP PICKS:

Brian Madden’s Top Picks

Brian Madden, Senior Vice President and Portfolio Manager at Goodreid Investment Counsel, discusses his top picks: Methanex, Laurentian Bank and Curaleaf Holdings.

Curaleaf Holdings (CURA CSE) last purchase April 2021 @ $ 16.59

Curaleaf Holdings is the world’s largest producer of marijuana, as measured by sales. Operating entirely in the United States and Europe but listed in Canada, Curaleaf is vertically integrated with a presence in 23 states and five Western European countries, including 24 culture sites, 30 processing facilities and 106 dispensaries. The company is growing rapidly, both organically with many new dispensaries opened in recent quarters and with licenses to open another 29 stores, as well as through acquisitions. The company is building on its roots in medicinal marijuana and is moving into recreational marijuana as more states, including five more in November through voting initiatives in the United States, legalize marijuana. Unlike the Canadian market which is over-supplied and where the regulated market has difficulty competing with the black market, the US market is under-supplied. And perhaps more importantly, unlike the vast majority of Canadian marijuana growers, Curaleaf has a strong strategy, strong board and management team, and excellent corporate governance and alignment between management. and shareholders.

Laurentian Bank (LB TSX) last purchase April 2021 @ $ 40.11

Laurentian Bank is a regional bank based in Quebec that is gradually diversifying across the country and the United States. Since last fall, under the new management of Rania Llewellyn, the first woman CEO of a major Canadian bank, the company has reshuffled management and is developing a new strategic plan that we believe will close the productivity gap with the big banks in their core deposit and lending businesses, better develop their nascent capital markets business and identify new opportunities growth while preserving their solid underwriting practices and their roots in banking relationships with personal and commercial clients. Trading at 0.8x book value versus peer banks that trade at a median price to book ratio of 1.6x, Laurentian Bank is the obvious value / turnaround opportunity in the Canadian banking industry.

Methanex (MX TSX) last purchase April 2021 @ $ 45.89

With a 14 percent share of the global market, Methanex is the world’s largest producer of methanol, a product used in blending fuels and in plastics and other chemical applications. The company operates six production sites in Canada, the United States, Chile, Egypt, New Zealand and Trinidad and Tobago. Rare among commodity producers, Methanex generates prolific free cash flow throughout the cycle, thanks to its efficient plants located near abundant sources of low-cost natural gas commodities. Demand and prices for methanol are returning from last year’s cyclical low, and Methanex profits, which rose 970 percent year-over-year in the first quarter, are back alongside the commodity. While stocks have also rallied strongly, they are trading at a modest book value of 2.2x from their ten-year average of 2.5x and well below previous cycle highs above 4x.

CSE TREATMENTS Yes N Yes
LB TSX N N Yes
MX TSX Yes N Yes

PAST PHOTOS: May 1, 2020

Brian Madden’s past selections

Brian Madden, Senior Vice President and Portfolio Manager at Goodreid Investment Counsel, discusses his previous picks: Open Text, CN Rail and Brookfield Asset Management.

Canadian National Railway (CNR TSX)

  • Then: $ 113.22
  • Now: $ 133.36
  • Efficiency: 18%
  • Total yield: 20%

Brookfield Asset Management (BAM / A TSX)

  • Then: $ 46.14
  • Now: $ 55.61
  • Efficiency: 21%
  • Total yield: 22%

Open text (OTEX TSX)

  • Then: $ 53.33
  • Now: $ 58.27
  • Efficiency: 9%
  • Total yield: 11%

Average total yield: 18%

CNR TSX Yes N Yes
BAM / A TSX Yes N N
OTEX TSX Yes N Yes

Company Twitter ID: @goodreidinvest

Company Website: http://www.goodreid.com

Other: https://ca.linkedin.com/in/brianjmadden



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