BCV Bulletin - Recent Trading Activity - September 17, 2024
SELL: Dollarama Inc. (TSX: DOL)
Dollarama Inc. is a leading retailer in Canada and Latin America, providing a large assortment of consumable products and general merchandise. As a result of the high inflationary environment, consumers have gravitated to Dollarama stores due to their compelling value proposition. Same-store sales have grown at double-digits rates annually due to market share gains, while margins have expanded due to internal cost-based initiatives. Dollarama’s stock has returned 146% over the last three years. Going forward, sales growth and earnings growth are expected to normalize. With the company trading at an elevated valuation multiple, we have exited this position and allocating this capital to an existing position, Bank of Montreal (BMO).
BUY: Bank of Montreal (TSX: BMO)
As noted above, BCV has used the proceeds of the Dollarama sell to add to our position in BMO. Shares of BMO have been under pressure following their latest quarterly report, largely on investor concerns about the bank’s credit performance in the United States. As long-term investors in the Canadian banks, we view these challenges as short-term in nature and a normal part of the lending cycle. Performance across the bank’s other segments continues to be headed upwards, specifically in Canadian personal and commercial banking, wealth, and capital markets. BMO is managing expenses well and delivering on synergies related to its most recent acquisition, the Bank of the West. Loan growth and deposit growth continue to be positive. The share price today provides an excellent entry point to increase our position in client portfolios.
SELL: TC Energy Corporation (TSX: TRP)
We have reduced our position in TC Energy Corporation. The company’s natural gas pipeline business has performed well and construction of new projects, such as Southeast Gateway, are progressing on-time and on-budget. The company has also reduced debt through the monetization of non-core assets, which has been received positively by shareholders. Year to date, the stock has performed well, returning 26%. Currently, the stock appears fairly valued and we believe there will be additional share price volatility following the pre-announced spin-off of the company’s liquids business, (South Bow) later this year. We have allocated this capital into a security with what we believe, is a more attractive risk/reward profile, Parkland Corporation.
BUY: Parkland Corporation (TSX: PKI)
Parkland Corporation is an independent marketer and fuel distribution company that operates an extensive retail fuel and convenience store network across Canada, the United States, and the Caribbean. The company is embarking on a mission to grow organically, pay down debt, grow its dividend, buy back shares, and sell-non-core assets. We are confident that Parkland can execute and grow its available cash flow per share by 15% per year by 2028. The current valuation provides an attractive entry point for our clients.
SELL: Enbridge (TSX: ENB)
BCV has fully exited our holdings in Enbridge Inc (“Enbridge”). While Enbridge’s dividend yield is significant, prospects for long-term share price appreciation appear limited and the company itself is “fairly valued”. The company is now focusing on its gas distribution businesses after a recent acquisition. Its core crude and gas pipeline business remains critical to North American distribution but is challenged with new sizable growth projects.
BUY: Northland Power (TSX: NPI)
We have added to our positions in Northland Power. They are a leader in developing high-quality offshore wind power projects underpinned by long-term revenue contracts that deliver predictable cash flows. They are in the midst of two large projects and we anticipate 7-10% growth per year through to 2027. It currently is valued at a discount to it’s peers, which we believe will shrink over time as projects come to completion. Northland Power currently pays an attractive dividend of 5.4%.
SELL: JPMorgan Chase & Co. (NYSE: JPM)
JPMorgan Chase & Co. is one of the best-managed banks in the United States, known for its strong capital position, high return on equity, and leadership in the financial sector. The company’s disciplined management and diversified business allow it to outperform peers, making it a premium stock. However, we believe much of JPM’s performance is already reflected in its elevated stock price, limiting future upside potential. The stock’s premium valuation, while justified by quality, suggests that further growth may be modest as key earnings metrics normalize over time. Trimming this position is a prudent move to capitalize on gains and reduce exposure to a more limited growth outlook.
BUY: Granite Real Estate Investment Trust (NYSE: GRP.UN)
Granite Real Estate Investment Trust specializes in industrial and logistics properties, a sector that continues to see robust demand. The company has a conservative balance sheet, strong funds from operations growth, and a focus on high-demand logistics assets, positions it well for future expansion. Granite REIT is currently trading at a discount to its Net Asset Value , making it an attractive investment compared to other real estate opportunities. With its strategic positioning and ability to capitalize on growing market demand, we believe Granite REIT offers a more favorable risk/reward profile for both growth and income. This has presented a strong buying opportunity, particularly given the stock's discount and stable fundamentals.
Source: All references to market data, returns, and values are sourced from FactSet
This BCV Bulletin is intended for residents of the provinces and territories in which we are registered, is not meant to be a solicitation to any persons not resident in those jurisdictions and does not constitute an offer to buy or sell our products or services. Any opinions expressed are just that and are subject to change. Information is provided on a best-effort basis and its accuracy cannot be guaranteed. Information may also be provided from third party sources which are believed to be reliable, but we do not guarantee its accuracy or completeness. Certain statements may contain forward-looking statements, which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. This BCV Bulletin has been prepared for general informational purposes only, is not intended as investment and/or financial advice on any subject matter and the securities mentioned should not be construed as a recommendation for any specific securities. ©BCV Asset Management Inc. 2024.
