Three months ago it looked like the world was coming to an end with markets, commodities, and the Canadian dollar all falling precipitously. Clearly, in hindsight, they all declined too far, too fast with the result that they have all, in our opinion, rebounded too far, too fast. Short covering has had a lot to do with the subsequent rebounds as not a lot of new money has been committed to stocks, commodities, or currencies. Our plan was to use the market decline to invest  a great deal of our cash, mostly into Canadian stocks. We were only partly successful in that venture as we were able to add a couple of new names but markets continued to rise to where we are currently and at these prices we find it difficult to continue adding new names to our portfolio. Hopefully a much needed correction will rectify that situation.

TOP PICKS:

Power Financial (PWF.TO)

Power Financial, through its majority interests in both Great-West Lifeco (67.1 percent) and IGM Financial (58.7 percent), is a major Canadian financial services holding company.  In addition it owns a 27.8 percent interest in European investment company, Pargesa Holdings. Prior to the financial crisis, Power Financial had a record of raising its dividend twice each year. Subsequent to the crisis, it maintained but didn’t raise its dividend until March of last year and it has raised it again recently this year. Through a combination of higher earnings from both GWO and IGM as well as a recovering Europe aiding Pargesa, we see Power Financial’s earnings growth rate continuing to increase. It is a sum-of-the-parts company and we quite like the parts. Currently PWF yields a very attractive 4.8 percent and we see that continuing to grow at least annually.

Cara Operations (CAO.TO)

Bought on April 28 at $32.75

Cara is Canada’s oldest and largest full-service restaurant company operating some of the most recognized names in the country. Over 88 percent are franchised and 66 percent (including soon-to-acquired St. Hubert) are in Ontario. We like the continued move by Cara to an asset-light business model.  When valued versus comparable US restaurant peers, Cara is in the middle of the pack. It is different, however, as it is a consolidator in the highly-fragmented Canadian market and has a clearer growth path than most of its peer group. Cara has excellent management and an opportunity to increase sales, squeeze higher margins from recently acquired businesses and increase franchise fees on many of its legacy restaurants.

Kuehne and Nagel International (KNIN.VX)

Bought April 4, 2013 at Sfr 102.3.

Kuehne and Nagel is the leading global logistics company incorporating sea freight, air freight, road & rail logistics, contract logistics, real estate and insurance brokerage. The logistics industry is a defensive sector with attractive growth characteristics. The company has a strong balance sheet with net cash of approximately Sfr 900 million and a 3.6 percent yield with a dividend that grows each year. We expect it to benefit from the growth in import/export trade volumes between developed economies; amongst emerging and developing economies; and amongst high growth emerging economies. It is an excellent way to play the growth in global trade. It also trades on the Pink Sheets under KHNGF (stock) or KHNGY (ADR).

Past Picks: April 17, 2015

CCL Industries (CCL'b.TO)

General Electric (GE.N)

Power Financial (PWF.TO)

Total Return Average : +22.01%