BCV Bulletin - Recent Trading Activity - October 24, 2024
SELL: South Bow Corporation (TSE: SOBO)
BCV is exiting its position in South Bow Corporation (SOBO). SOBO emerged a spin-off company out of TC Energy Corporation (TRP) in September 2024 and is comprised of a network of crude oil pipeline infrastructure, including the Keystone Pipeline asset, which represents approximately 80% of its earnings. We found SOBO’s defensive characteristics (highly contracted, key infrastructure asset) and meaningful dividend yield (approximately 9% at inception) attractive. However, following its recent price appreciation, the current dividend yield realized is now less meaningful. Further considerations related to our sell decision is its limited projected growth over the next 2-3 years while the company focuses on debt reduction, and the expectation of no dividend growth over the same time period. As such, we see better relative value opportunities in the equity markets to deploy investor capital.
BUY: Boyd Group Services Inc. (TSE: BYD)
BCV is adding capital to a new model security, Boyd Group Services Inc. (Boyd). Boyd is a leader in the automotive collision and glass repair industry. Boyd is expected to gain market share by partnering with automotive insurance companies through direct repair programs as a result of its best-in-class service and repair times. Boyd also is expected to benefit from their scale and expertise as vehicle complexity increases due to advanced driver-assistance systems and enhanced OEM (original equipment manufacturer) certifications. The company is also poised for projected inorganic growth by continuing to consolidate smaller players in its highly fragmented industry sector.
SELL: Wells Fargo & Company (NYSE: WFC)
We have decided to sell our position in Wells Fargo & Company, a large and diversified United States multinational financial services company. We continue to see value in the company, however, valuations are nearing full value. We have seen its value rise 31% on a year to date basis, largely on expectations of an economic soft landing in the United States. While the company continues to return capital to shareholders and reduce costs, growth in assets and loans remains a challenge. Regulatory pressure is abating; however,we believe the market has priced in the majority of that benefit to date. On a relative basis, we believe there are better opportunities for investor capital, and we still maintain exposure to the United States. and Canadian Financial sector.
BUY: Humana Inc. (NYSE: HUM)
BCV is adding Humana Inc. to our United States equity model. Humana is a highly rated operator in the health insurance industry, making it an attractive investment opportunity in the Health Care sector. We believe that the company's assets are currently being undervalued in the market, providing an opportunity to add a high-quality business to our healthcare holdings. Humana has a strong track record of profitable growth and consistent dividend increases. Notably, it has the highest exposure to the Medicare Advantage business line, which is expected to grow at double-digit rates in the coming years.
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.
