Ian Shaffer, president of Galliant Advisors

Focus: U.S. equities
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MARKET OUTLOOK
The market may continue to be volatile in the near-term as the U.S. election approaches and the possibility of the U.S. Federal Reserve making a decision on interest rates by year-end. Investors have continued to push 2016 winners higher, many of which are lower-quality names, while underperformers remain under pressure. We expect this to change as patience will be rewarded to holders of high-quality companies over the long-term as investors return their focus to companies with strong fundamentals.

TOP PICKS

AMAZON.COM (AMZN.O)
Amazon has become a global leader in e-commerce and cloud computing due in no small part to its visionary CEO Jeff Bezos. He has demonstrated time and again that he knows what consumers want before they do, similar to the late Steve Jobs. Adjusting Amazon’s GAAP earnings to non-GAAP implies a P/E ratio of 36x 2018 estimates, a reasonable valuation for a dominant company with 28 per cent-plus YoY revenue growth and 36 per cent-plus YoY EPS growth. Additionally, Amazon has many other differentiating factors which are key to its success as a leading online retailer. These factors include: Amazon Web Services, Amazon Prime (used by over 50 per cent of U.S. households), and the Fulfillment by Amazon initiative (aiding small businesses to sell their products online). All of these key differentiating factors culminate to more than 50 per cent of shoppers turning first to Amazon in search of products.

HILTON WORLDWIDE (HLT.N)
Aside from having one of the most recognizable lodging brands in the world, Hilton will be unlocking value for shareholders by splitting into three separate companies towards the end of 2016. Separating its hotel management, timeshare and real estate businesses into pure-play entities will allow the management of each segment to develop clear strategies and fully use their balance sheets. The split will also cause investors to be ‘stickier’ as they can choose which entity to buy and hold. Furthermore, each company is likely to trade at a higher multiple as they can now be valued more appropriately against their peers. We believe the stock has 45 per cent upside from current levels based on our sum-of-the-parts analysis.

UNDER ARMOUR (UA.N)
Under Armour, led by founder and CEO Kevin Plank, has been developing a strong brand and differentiating its products with a focus on innovation and technology. The company has continued to post outstanding revenue growth, with YoY top-line growth of 30 per cent and 27 per cent in the first and second quarter, respectively, led by strong growth in footwear of 64 per cent and 58 per cent in Q1 and Q2. An increasing proportion of this growth has been coming from abroad, which in the most recent quarter represented 15 per cent of sales and grew at 68 per cent YoY. These international markets, including China, are likely to provide a longer-term runway for top-line growth. Under Armour’s market capitalization of $15.5 billion is less than 18 per cent of Nike’s, but we believe that gap will close.
 

FIRM PROFILE
Founded in 2007, Galliant Advisors LP is a Montreal-based investment management firm offering investment solutions for a growing client base of high-net worth individuals and institutions. At Galliant, we utilize an event-driven and fundamental investment approach supported by strong financial analytics to successfully uncover investment securities poised for near-term share price movement. Our objective is to make prudent investment decisions that will enable us to outperform the market while reducing risk by limiting net market exposure.

We offer our clients discretionary, separately-managed accounts, as well as hedging strategies through the Galliant Equity Long/Short (GELS) Fund and the Galliant Market Neutral (GMN) Fund.

IAN SHAFFER’S BIO
Mr. Shaffer founded Galliant and is responsible for managing the firm and the portfolios. Prior to Galliant, Mr. Shaffer worked in corporate finance at ABN AMRO and in investment management at U.S. hedge funds Atticus Capital and Sebago Capital. Mr. Shaffer is a graduate of McGill University (BCom) and received his MBA from the Massachusetts Institute of Technology (Sloan). Ian can be seen regularly on BNN. He also wrote the weekly Stock Picks column in the Montreal Gazette newspaper and has been a featured guest on “The Aaron Rand Show” on Montreal’s CJAD 800 radio.

WEBSITE: www.galliantcapital.com