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   BNN Market Call Newsletter: April 21, 2014
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BNN - Business News Network
Market Call Newsletter: April 21, 2014

Market Call:

For video, market analysis and more click here

Fabrice Taylor, Publisher, the President’s Club Newsletter

FOCUS: North American Equities

Market Outlook:

Big caps are starting to look pricey, but we live in different times, with low interest rates and tame inflation, so the old yardsticks don't necessarily apply as rigorously as they have in the past. You might see some sector rotation in the coming months, as institutions sell one to buy another. That might lead to choppiness, which is great for the retail investor who can keep his wits about him. I don't expect that returns will be as good this year as last for indices, but I don't really care about the index because there are always individual stocks going up even in poor markets. It's my mission to find them.

TOP PICKS:

easyhome (EH TSX)
Most recent purchase was last week at $18.
The company is one of the cheapest growth stories in Canada. It operates two divisions, one leasing furniture and appliances, the other making loans to the credit challenged. The leasing business is nicely profitable but mature. The lending business is growing rapidly. As an added bonus, the bankruptcy of Cash Store, the payday lender, could be great news for Easyhome, as Cash store has about 100 locations in Ontario, which has banned payday loans. Easyhome will be able to acquire store leases in excellent locations, and pick off Cash Store customers, which should accelerate growth.

McCoy Corp. (MCB TSX)
Most recent purchase was two weeks ago at $6.05.
This company makes tools for the oil and gas industry. It has offices in Houston and Lousiana, where it services the offshore drilling industry, which has been strong. McCoy has made excellent inroads selling various tools to the big players in the oil patch, and while this is a competitive business, which is reflective in pricing of original orders, customers have to buy replacement parts from McCoy. Next year we'll see a lot of replacement part orders for some of the new products it introduced in the past couple of years. Furthermore, the stock was crushed when the company announced a botched ERP installation. This happens often with ERP, but it's temporary, and ultimately the system will boost profits. The stock is temporarily cheap, pays a dividend and the company has no debt and lots of cash.

theScore (SCR TSX-V)
Last purchase at $0.30
The Score used to be a sports station but it was bought by Rogers. The company kept the website and app, and the app is growing rapidly. It's number 2 in North America, and particularly big with sports betters. Company has revenue but no net income, but there's still room for growth, as there are lots of sports fans out there who don't use apps. What makes it particularly interesting to me is that the firm did a financing two weeks ago at 30 cents (I participated) and insiders and their family and friends took about $8 or $9 million of $15 million. Apps are popular with investors, and this one is not well known so I think it goes up from here.

Disclosure: Personal Family Portfolio/Fund
EH
Y Y N
MCB
Y Y N
SCR
Y N N

Past Picks: May 29, 2013

NeuLion (NLN TSX)
I still own Neulion and I believe it's going a lot higher. It popped recently when The Globe and Mail said it could be the next Netflix, which is true, although it won't ever be that big. When a stock like this pops sharply on big volume, I always advise subscribers to take some profit. The stock has settled down and looks ready to rise again, so I think this is a good entry point. It will eventually be sold to a bigger player for a lot more than the current price in my view.

Then: $0.38 Now: $0.95 +150.00% TR: +150.00%

New Flyer Industries (NFI TSX)
I still own and like New Flier. When this bus maker's margins return to normal levels I think the stock will be quote closer to $20. In the meantime, it grinds higher and pays a dividend. And remember that Brazilian bus maker Marcopolo owns 20% of New Flier. That puts a target on the stock's back.

Then: $10.16 Now: $11.25 +10.73% TR:+15.74%

Premium Brands Holdings (PBH TSX)
Premium Brands is extremely well run but I moved to a sell in January over concerns about food inflation and valuation. I'm not sure they can pass it on to customers quickly, or that their deft acquisition strategy will compensate. I keep it on my watch list however.

Then: $18.36 Now: $21.50 +17.10% TR: +24.56%

Total Return Average : +63.43%

Disclosure: Personal Family Portfolio/Fund
NLN
Y N N
NFI
Y Y N
PBH
N N N

Website: www.presidentsclub.ca

Twtitter: @clubresearch

Follow us on Twitter: @marketcall


Market Call Tonight:


For video, market analysis and more click here

James Hodgins, Chief Investment Officer, Curvature Hedge Strategies

FOCUS: Market-Neutral Investing (Small & Mid-Cap Stocks)

Market Outlook:

We remain cautious on the broader market as despite recent dovish statements the U.S. Fed is committed to winding down its QE by the fall. The market will likely peak in advance of this as it did in 2011 prior to the end of QE 2. Our long positions are high growth companies that don't depend as much on the market continuing to climb as the individual company execution.

TOP PICKS:

GuestLogix (GXI TSX)
Last Purchase: 2 weeks ago at $1.23
Platform built for air travel purchases where company has more than an 80 percent market share in North America. Huge contract momentum now levering that platform into higher margin on premise airport and train business. Expect revenue and profits to ramp in next two quarters following those contracts. Most recent purchase two weeks ago at $1.25. One year target is $2.00 but much higher longer term targets driven by international growth.

Merus Labs International (MSL TSX)
Last Purchase: 2 weeks ago at $1.65
Recent capital raise will enable an acquisition that drives growth and diversifies the company's revenues. This should result in a rerating of the shares more in line with its competition. At only five times EV/Ebitda the company trades at half the multiple of closes comparable company Concordia Health. One year target of $2.50 but longer term targets closer to $5.00 if the company executes on building its drug portfolio.

Bellatrix Exploration (BXE TSX)
Bought today at $10.25
Best funded intermediate production growth story with 22k boe/d to 43k boe/d with further growth fully funded by JV partners. The growth takes the valuation from 6x EV/DACF to four times. As the extra production comes on, we expect the stock to match the growth. Unlike many peers they don't need a lot of luck with the drill bit as much of this growth is already behind pipe and will be unlocked by simple infrastructure additions. One year target $15. Could see up to $18 on a takeover.


Disclosure: Personal Family Portfolio/Fund
GXI
N N Y
MSL
N N Y
BXE
N N Y

Past Picks: May 27, 2013

Aastra Technologies Limited (AAH TSX) Acquired by Mitel Feb 4, 2014
Special dividend paid out: August 16, 2013
(Curvature holds no Mitel shares)

Then: $19.35 Now: $41.94
+116.74%
TR: +156.02%

VersaPay Corporation (VPY TSX-V)

Then: $1.45
Now: $1.25
-13.79%
TR:-13.79%

*Short* Equitable Group (EQ TSX)

Then: $36.21
Now: $59.56
-64.49%
TR: -66.77%

Total Return Average : +25.12%

Disclosure: Personal Family Portfolio/Fund
AAH
N N N
VPY
N N Y
EQ
N N Y

Fund Profile
Curvature LP

Performance as at: March 31, 2014


Fund Index*
1 Month
-0.86%
0.88%
1 Year 7.78%
12.44%
3 Year annualized 8.44%
0.52%

*Index: S&P/TSX
*Fund returns are net of fees

Top 5 holdings
Uranium Participation 2.77%
Parex Resources Inc. 2.55%
Fairfax Financial HLD 2.51%
Guestlogix 2.34%
easyhome 2.27%

Website: www.curvaturehedge.com

Follow us on Twitter: @marketcall


This newsletter is for information purposes only and is not tailored to the needs of any particular individual or company, is not an endorsement, recommendation, or sponsorship of any entity or security, and does not contain investment advice.

BNN strongly recommends that you seek advice from a qualified investment advisor before making any investment decision.

One or more affiliates of BNN may invest or otherwise hold interests in entities which may be referenced in this newsletter. This newsletter is not intended to describe securities bought, sold, or held on behalf of any affiliate of BNN, and is not an indication of any intention to buy, sell, or hold any security.


Tuesday April 22 AM Guest Line Up

7:00 am - The Street - Guest Host
Mike Newton, Portfolio Manager & Director Wealth Management, ScotiaMcLeod

8:45 am - The Street - Rogers Earnings
Maher Yaghi, telecom, media and tech analyst, Desjardins Securities

10:35 am - Business Day - MTY Group: why it's everywhere in Canada
Leon Aghazarian, Analyst, National Bank Financial

10:35 am - Business Day - Why Canadian Small Caps Should Continue to Outperform
Martin Roberge, Portfolio Strategist and Quantitative Analyst, Dundee Securities


Tuesday April 22 PM Guest Line Up

12:00 pm - The Business News - Mid-Day Business Roundup
Michael Hainsworth, Anchor, BNN

1:00 pm - Market Call - North American Large Caps and Long/Short Strategies
Colin Stewart, Portfolio Manager, JC Clark Limited

2:25 pm - Business Day PM - CP Earnings & CN Rail Preview
Keith Schoonmaker, Analyst, Morningstar

2:35 pm - Business Day PM - Gilead Reports
Robyn Karnauskas, Biotechnology Analyst, Deutsche Bank

5:30 pm - Headline - Russia's Ambassador on Ukraine
Georgiy Mamedov, Ambassador, Embassy of the Russian Federation in Canada

6:00 pm - Market Call Tonight - Technical Analysis and Seasonal Investing
Jon Vialoux, Research Analyst, Horizons ETFs Management Canada Inc.



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