acquisition strategy
Exchange Income Corp., $24.18, symbol EIF on Toronto (Shares outstanding: 23.2 million; Market cap: $560.9 million; www.exchangeincomecorp.ca), operates in two main areas: aviation and manufacturing. The aviation business (77% of revenue) includes regional airlines Perimeter Aviation, Keewatin Air, Calm Air International, Bearskin Lake Air Service, Custom Helicopters and Regional One. These airlines serve communities in Manitoba, Ontario and Nunavut. The manufacturing business (23% of revenue) includes WesTower Communications Canada (a maker and installer of wireless communication towers), Jasper Tank, Overlanders Manufacturing, Water Blast Manufacturing and Stainless Fabrication....
AutoCanada Inc., $32.33, symbol ACQ on Toronto (Shares outstanding: 24.5 million; Market cap: $822.8 million; www.autocan.ca), has 49 franchised car dealerships in eight provinces. The company sells numerous brands, including Chrysler, Dodge, Jeep, Ram, Fiat, Chevrolet, GMC, Buick, Cadillac, Nissan, Hyundai, Subaru, Audi, Volkswagen and BMW. However, Chrysler vehicles (including Dodge, Jeep, Ram and Fiat) supply around 70% of its revenue. In 2014, AutoCanada’s dealerships sold roughly 57,000 vehicles and processed about 786,000 service and collision-repair orders in their 822 service bays....
GENUINE PARTS CO. $88 (New York symbol GPC; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 152.3 million; Market cap: $13.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.8%; TSINetwork Rating: Average; www.genpt.com) gets 53% of its sales and 55% of its earnings by selling replacement auto parts: Genuine operates 1,100 outlets under the NAPA banner, and its distribution business serves 4,900 independent stores in North America, Australia and New Zealand. The company also distributes industrial parts (31% of sales, 29% of earnings), office products (12%, 11%) and electrical equipment (4%, 5%). As the economy improved after the 2008/09 recession, the company’s sales rose 36.9% from $11.2 billion in 2010 to $15.3 billion in 2014. Overall earnings jumped 49.6%, from $475.5 million to $711.3 million. Per-share profits gained 53.7%, from $3.00 to $4.61, on fewer shares outstanding....
At first, the Trans-Pacific trade pact could hinder dairy producer Saputo, a top growth stock for us. But we like its long-term prospects.
SAPUTO INC. $30 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 392.9 million; Market cap: $11.8 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.saputo.com) is Canada’s largest producer of dairy products, including milk, butter and cheese. The company also operates dairies in the U.S., Australia and Argentina. In its 2015 fiscal year, which ended March 31, 2015, Saputo’s sales rose 15.4%, to $10.7 billion from $9.2 billion in 2014. That’s mainly due to Australian dairy producer Warrnambool Cheese and Butter Factory; Saputo paid $449.6 million for 87.92% of this business in February 2014. Warrnambool’s contribution helped offset lower cheese prices in fiscal 2015....
Canada is now negotiating the Trans-Pacific Partnership, which would lower trade barriers between 12 countries in the Asia-Pacific region. The TPP could also open Canada’s highly regulated agricultural industry to foreign competitors. That would hurt Saputo and Maple Leaf Foods (see box)—at least initially—though the deal would also help them export their products to more markets. Still, we feel both stocks will make little progress until the TPP is finalized. SAPUTO INC. $30 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 392.9 million; Market cap: $11.8 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.saputo.com) is Canada’s largest producer of dairy products, including milk, butter and cheese. The company also operates dairies in the U.S., Australia and Argentina....
GENUINE PARTS CO. $88 (New York symbol GPC; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 152.3 million; Market cap: $13.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.8%; TSINetwork Rating: Average; www.genpt.com) gets 53% of its sales and 55% of its earnings by selling replacement auto parts: Genuine operates 1,100 outlets under the NAPA banner, and its distribution business serves 4,900 independent stores in North America, Australia and New Zealand.
The company also distributes industrial parts (31% of sales, 29% of earnings), office products (12%, 11%) and electrical equipment (4%, 5%).
As the economy improved after the 2008/09 recession, the company’s sales rose 36.9% from $11.2 billion in 2010 to $15.3 billion in 2014. Overall earnings jumped 49.6%, from $475.5 million to $711.3 million. Per-share profits gained 53.7%, from $3.00 to $4.61, on fewer shares outstanding.
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The company also distributes industrial parts (31% of sales, 29% of earnings), office products (12%, 11%) and electrical equipment (4%, 5%).
As the economy improved after the 2008/09 recession, the company’s sales rose 36.9% from $11.2 billion in 2010 to $15.3 billion in 2014. Overall earnings jumped 49.6%, from $475.5 million to $711.3 million. Per-share profits gained 53.7%, from $3.00 to $4.61, on fewer shares outstanding.
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SNC-LAVALIN GROUP INC., $46.40, Toronto symbol SNC, gained 3% this week on speculation that larger engineering firms in Spain and Australia are interested in buying the company. The stock fell to $36.24 in March 2015 after the RCMP laid charges against SNC and two of its subsidiaries for using bribes to win construction contracts in Libya between 2001 and 2011. These are the same allegations that prompted the company to replace its senior executives in 2012 and bring in a new program to enforce ethical practices. SNC plans to fight these charges....
Patient Home Monitoring, $1.69, symbol PHM on Toronto (Shares outstanding: 231.8 million; Market cap: $391.7 million; www.phmhometesting.com), plans to keep buying small firms that serve chronically ill patients in their homes. It then aims to raise its per-patient revenue by offering these companies’ services to its growing client base. In the three months ended March 31, 2015, Patient Home Monitoring’s acquisitions boosted its revenue by 255% from a year earlier, to $10.0 million. Preliminary results show the company earned $1.6 million in the latest quarter. Patient Home Monitoring recently sold 39 million shares at $1.50 each to raise $58.5 million. It will use these funds to make more acquisitions....