Fabrice Taylor, publisher of the President’s Club Investment Letter

Focus: North American equities
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MARKET OUTLOOK
There is always something worth buying but by and large, stocks are very expensive and have also had a pretty good run since Trump was elected, so one should expect at least a pullback if not a correction of some kind. It’s also worth remembering that this bull market is eight years old, which is pretty old. If interest rates rise, and it looks as though expectations for a rise in rates are themselves rising, then stocks could go through a fit of selling. Hold lots of cash to be ready for it.

TOP PICKS

Fabrice Taylor - Top Picks

Fabrice Taylor of the President's Club Investment Letter gives his outlook for shares of Birchcliff Energy.

CENTRIC HEALTH (CHH.TO)
Centric operates two divisions in the health-care space. The first offers private surgeries and the other is an industrial pharmacy, which caters not to individuals but rather to wholesale buyers of prescription services like old-age homes. Demographics and worsening government finances (leading to more services being cut from our health-care system) are two favourable trends, but this is also a turnaround story so there may be big upside if management can continue to deliver better margins and pay down debt. I own it and last bought it this week for 75 cents.

RED EAGLE MINING (R.TO)
Red Eagle has commissioned its brand new mine and mill in Columbia and is on the cusp of commercial production. This is a “re-rating” story, meaning once investors believe the mine and mill are operating correctly and the gold production forecasts are reliable, the stock’s multiple will be re-rated higher. Red Eagle currently trades for about two times estimated 2018 earnings whereas more mature peers trade at more than 10 times, so the idea is that the re-rating takes the stock price up significantly, should all go well. The grades at the mine are good and there is also a lot of exploration upside because the company hasn’t done much drilling yet. I own it and bought it two weeks ago for 75 cents. 

POLARIS INFRASTRUCTURE (PIF.TO)
Polaris operates a geothermal power plant in Nicaragua. It has a very good purchase agreement with the grid operator and delivers 85 per cent EBITDA margins in U.S. dollars. The current yield is about four per cent with the dividend paid in U.S. dollars, but there is enough free cash flow to pay a 10 per cent yield or more, and the board has already stated its intention to increase the payout over time. It has done so twice in the past year. So the stock should rise with the dividend, but there is also upside through more wells and also technology investments that would increase efficiency. As a single asset power producer, the company is probably a takeover target for bigger, more diversified producers as well. I own it and last bought it a month ago for $15.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CHH Y Y N/A
R Y Y N/A
PIF Y Y N/A


PAST PICKS: MARCH 9, 2016

Fabrice Taylor - Past Picks

Fabrice Taylor of the President's Club Investment Letter reviews his past picks: Gold Standard Ventures, IBI Group and cash.

GOLD STANDARD VENTURES (GSV.V)
I still own the stock and believe we’re in the eighth inning of the game, meaning the company will be bought out by a producer soon. Both Goldcorp and Oceana Gold are shareholders already. The team behind Gold Standard Venture has launched a new, much earlier-stage exploration company called GFG Resources (GFG.V) and I have invested in that one on the hope that they can repeat their success.

  • Then: $1.32
  • Now: $3.59
  • Return: +171.96%
  • TR: +171.96%

IBI GROUP (IBG.TO)
I still own it via convertible debentures and believe there is more upside because I believe we’ll see lots of government-funded infrastructure spending, particularly transit systems, in the coming years.

  • Then: $3.84
  • Now: $6.45
  • Return: +67.96%
  • TR: +67.96%

CASH
I believe investors should have a healthy amount of cash and be ready to pounce on opportunities, be it a correction of the market in general or individual stocks. 

TOTAL RETURN AVERAGE: +119.96%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
GSV Y Y N/A
IBG Y Y N/A


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