Blog

Canadian Portfolio Transactions – July 2017

Sales : 

– North West Company (NWC) – Market Trend. Decrease of our number of positions (-1) in the Consumer Staples sector. We decided to keep Metro Inc (MRU) because of its higher SPscore, more attractive multiples (P/IV, FGV) and higher free cash flows. NWC’s intrinsic value has been slowly decreasing over the past 2 quarters and now sits below the stock price.

– Winpak (WPK) – SPscore. Winpak got replaced by CCL Industries (CCL.B). With WPK’s quick price increase over the past months, the stock is now overvalued by one of the largest margins observed in the past 5 years. Its EVA is stagnant since 5 quarters, which tells us the economic performance has stopped improving even though it is still good.

Buys : 

– Constellation Software (CSU) – Market Trend. Increase of our number of positions (+1) in the Technology sector. CSU ranks #2 among Canadian Large Cap Technology stocks. The company generates the highest EPI (4.0) of the group and its free cash flows are constantly increasing. The stock trades below its intrinsic value and the premium of 22% reflected by the Future Growth Value (FGV) is reasonable considering the high growth profile of the company.

– CCL Industries (CCL.B) – SPscore. CCL now represents a better opportunity than WPK, which it replaced in the model. CCL’s stock trades below its intrinsic value and is also discounted when looking at the negative future growth value. The amount of EVA it generates is still increasing, just like the free cash flows. The WPK – CCL.B replacement allowed us to improve the portfolio quality : we sold a stock with a 61% SPscore for another one at 75% in the same sector and a very similar profile.

The two new positions entered the model portfolio with a weight of approximately 5.7%.

Share