Cooperman said they rotated out of Apple (AAPL) when it was in the 600’s into Qualcomm (QCOM), which trades at a mere 14 times earnings with a fortress balance sheet.
Also in the smartphone space, Cooperman mentioned Motorola Solutions (MSI) as being an attractive investment.
Cooperman spoke of medium-sized European stocks Michelin (MGDDY), oil services company Technip (TKPPY), Swatch (SWGAF), and health care company Fresenius (FMS) as being reasonably valued. Cooperman said a REIT paying 11%, Chimera Investment (CIM), could represent a turnaround situation. Sandridge Energy (SD) was viewed favorably by Cooperman with an underlying business value of $10 per share, 50% higher than where it’s presently trading. Shame on Leon for touting his holdings before the coming devastating worldwide collapse in equities. We anticipate that the US economy will continue to accelerate as the year progresses, barring any major geopolitical disruption. Alaris Royalty is a unique investment firm that invests in a diversified range of private companies with solid long-term histories and dedicated management teams. Cascades is a producer, converter and marketer of tissue and packaging materials in North America and Europe.   As the economy expands, the price of packaging material will increase.
Weston will continue to benefit from their 46% ownership of Loblaw as it generates more reach through their innovative extensions into cultural markets as well as product delivery through the integration with Shoppers Drug Mart.
Mark Bunting:          Tonight on Market Call, we have Michael Sprung, the president of the Sprung Investment Management and he’ll be taking your questions on Canadian Large Caps. Mark Bunting:          Would you say that the investors need to exercise a bit of precaution right now? People are looking for 2% to 2.5% GDP growth in a lot of instances and I think that at some point, the markets got to take a pause here. Mark Bunting:          Do you think Toronto Stocks are valued sort of ahead of their fundamentals?
Michael Sprung:        The risk reward is just not enough unless you’re just buying it to carry the dividend yield, which I think is what caused the market to maintain the strength that has.
Mark Bunting:          Are there certain stocks, Michael, though in certain sectors where there are areas of opportunity? Should we have a bit of a pause and then the economy begins to build again, that’s where you’re going to make money because particularly in materials, you want to buy them when they’re out of favor. Mark Bunting:          We have an email here from Albert and before I get to this on the Silver Wheaton, let me just tell you quickly here about Silver Wheaton.
Michael Sprung:        Well, as I’m saying, there are some opportunities in Silver Wheaton and the royalty takers as they call them, they look still quite expensive.
Now, if you think there’s going to be a slight recovery here, yes, their royalties are going to go up fairly significantly.
Michael Sprung:        For the most part, we always limit precious metals to about 5% or less of the portfolio. Jim:                       Michael, do you like CIBC Bank and when do you think they’ll split the stock? Michael Sprung:        Well, CGI group, they basically are a software firm that contracts out largely to governments and so on. Michael Sprung:        Well in that area, you really have got sort of the engineering and then the engineering construction firms and so on.
The recent sale that they made over $3 billion for that franchise, that was much more than people thought they would get and that should easily cover any sort of fines that might come up.
Back to Canadian Large Caps, we have Anne in Edmonton kicking off a bunch of questions here on Energy. In the meantime, you’re being paid 5.6% on their dividend which that would be in jeopardy if their balance sheet got anymore in trouble, but they’ve already cut that distribution earlier. Mark Bunting:          Would you say that they’re potentially here, if they get it right, this stock could really do well because it’s still under $10, it used to be a $38-stock back in the day. On a cash flow basis, I think they came in just about where people were expecting them to come in. Michael Sprung:        Well, I think with ShawCor in particular, stocks tend to go up in sort of lumpy chunks here and there. Michael Sprung:        Well, we own Precision Drilling and we think that they’re very good.
Michael Sprung:        Well, it was the natural gas liquid’s pricings that pulled them down. Mark Bunting:          Let’s have a look at the “Past Picks” here of Michael Sprung, the president of Sprung Investment Management.
Michael Sprung:        Well, here’s a stock that a year or so ago, they talked about they’re going to concentrate on capital discipline and so on and so forth. I think that given that the Newmont deal at least has been put off for now, I think that the stock should go up again.
Michael Sprung:        I would say it’s primarily because of all of the banks, Scotiabank has traditionally always had the best credit discipline.
Mark Bunting:          Maybe we’ll talk more about that a little later on at the bottom of the hour.
Michael Sprung:        Well, I wouldn’t say it’s in the declining stock but I’d say that certainly potash and fertilizers have had their troubles this year whether they have been phosphates, nitrates or potash. I think given the problems that they have been having in sort of the fertilizer agriculture markets right now and with the — particularly with respect to potash which has had more competition against Canpotex with Belarusian and some of the other, I guess, buying group or selling groups.
The one thing about potash is it’s not that hard to get it out of the ground but it’s a very heavy material to ship to wherever you have to get it shipped to. Let’s face it, this stock has now gone from — it was lingering in the $20’s for quite a while and now it’s up around $38, I think.
Mark Bunting:          All right, Michael, a short break here and we’ll get back to questions on Canadian Large Caps. They service a lot of industries, not just oil and gas and forestry and so on, but this is a stock that I think the Southern family has run very well over the years. Just on a valuation basis though, I would not be jumping in today but that’s where I sit on it anyway.
I think that at current levels, so I look at the multiples, it’s selling at roughly 20 times, 20 times current years expected earnings. Michael Sprung:        Well again, on the multiple bases, it looks somewhat similar but the thing about Inter Pipeline is they always seem to have a lot of projects. Michael Sprung:        Painted Pony is one that we don’t own and I haven’t followed too closely, but I do know some things about it and I have admired the progress that they’ve made over the last few years. It’s certainly one that we’re constantly looking at and it’s one that we could certainly be buying in the near future. Mark Bunting:          It’s often said it has a nice parcel of land in Montney, in BC and it could be a Take-out Candidate.
Michael Sprung:        But I mean the reason it would be is because it is a very good company, very good assets and people are looking for good assets these days. Mark Bunting:          Let’s take a pause here and we’d get back to questions on Canadian Large Caps after this. What they have done recently, which I think really caused the pop today is when the earnings came out today, people looked at the margins and they were way above the normal level of margins for Linamar and that’s because they are going into products that take a lot more capital expenditures to build and therefore, they have to build in a lot more margins to make that up over the lifecycle of the project.
It’s a new ballgame and that’s why the stock is as high as it is but I take your point, we saw a big jump today. Michael Sprung:        Well, you know, I’m a little mystified by the valuations on the railroads these days. On a relative valuation basis, if I was buying one of them today, I would certainly be buying CN. As the North American economy improves, I think CN overall stands to benefit a little bit more than CP.
Michael Sprung:        Well, a couple of years ago, they bought a mine, Tasiast, and it has been quite controversial but just lately, things have been improving in that mine. We just saw it recently, wherein in Ontario, they decided not to go ahead and expand some nuclear facilities or refurbish them. Mark Bunting:          All right, we have “Top Picks” coming up from Michael Sprung and he’s got some interesting ones here that you might not expect and we’ll look at those after this. Mark Bunting:          It is time for “Past Picks” with Michael Sprung, the President of Sprung Investment Management.
Michael Sprung:        Well, for a long time, it just kept running ahead and ahead and ahead of where I felt comfortable buying it. Michael Sprung:        But they tend to look at companies that have got at least 10-year track records of solid management. As time goes on, they are diversifying more and more of the industries that they’re in, so they’ve got selection of industrials from rebar to other and healthcare from mental health to other healthcare providers, physiotherapy and so on, and even into retail. The bakery division right now is suffering a little bit with input cost and so on, but I think they are addressing that by investing a gain in plant and operations. Tweet About Michael SprungMichael founded Sprung Investment Management to meet the personalized needs of private clients, not-for-profit organizations, endowments, foundations and small institutions.
This entry was posted in Stock Reports and tagged AD, Alaris Royalty, CAS, Cascades, George Weston, WN by Michael Sprung.


Many investors have found themselves best served over long time horizons by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds.
Canadian markets have thus far outperformed many of their international counterparts, propelled in part by greater activity in the energy sector and strong agricultural commodity prices.
The nature of the investment allows Alaris to participate in future growth while the entrepreneurs maintain control provided certain agreed upon benchmarks are met.
In recent years, management has taken steps to realign the company and address any balance sheet concerns. The WN Food division is currently facing some pressures that should see some benefits before year-end as new plants come online and efficiencies are gained through their relentless focus on optimizing the production platform. The markets were good last year, they continue to forge ahead and particularly in Canada, I mean we’ve got markets.
I mean it’s getting much harder to find things that you’re really comfortable stepping in and buying unless your outlook is extremely long-term, but we always try to evaluate a stock when we’re looking at it. I mean, given the alternatives and fixed income, investors are largely just buying for yield.
After hours, coming out with their numbers in the first quarter, earnings per share 22 cents revenue which I have estimates at $165 million. Silver Wheaton’s pulled back from a high of over $30 to close to where it is today $20, $23, $59. We tend to run pretty conservative portfolios and it’s there usually more as a hedge against inflation or adverse geopolitical events or whatever. Yes, they still have one of the best capital ratios and yet, it earns one of the highest returns on equity.
Even today, I think on a relative basis, it’s selling at a fairly reasonable, multiple relative to the other banks. SNC, they are still negotiating with the government to see what the size of fines they might pay for the past transgressions with respect to getting contracts in foreign countries and so on. A breaking news here on Apple, multiple reports here, including the Financial Times saying that the company is close to buying Beats, the headphone company that the rapper and producer, Dr.
I think it is a bit of a turnaround story, although it is a little higher risk than we might own in client portfolios in general. I think that if they continue to take the steps that they have been taking lately, they can get through this period and hopefully, again, it is a little bit higher risk but hopefully, you will see a fairly good return. Certainly, if they really get it right and they really started to get this company going again, $20 wouldn’t be out of the question.
Is this the selling news and would you use the weakness in the stock to be picking it up at this price? It’s not nearly as dependent upon that anymore and they are very good operators and they’re very good acquirers. As you said, they beat people’s estimates of production, but I think that’s always somewhat suspicious because they always beat people’s estimates of production. And then, their changing of the old card with Peter Munk retiring and Brian Mulroney and some of the old members of the board retiring, and bringing a new fellow from Goldman Sachs. It should accelerate because certainly on a multiple bases relative to all of the other gold, this is still good earnings, cash flow producer. Although, you could argue that Don Lindsay is a former investment banker over Teck and since the Fording deal, he really hasn’t done anything in that area. I mean, that was a huge deal and it came along just at a bad time, but they have managed to more than pull out of that.
If you will look at their credit record and their provisions for credit losses over the years, this has always been an extremely disciplined bank and I think it’s a very smart bank, too. First of all, there is the sale off of Prairie Sky and then the next thing you know, they are buying a $3.1 billion worth of assets in the Eagle Ford.
Probably my fault asking a follow-up on Barrick, but give us 30 seconds each on Encana and Scotia, a little bit more information about your past picks.
Well, as I was saying, with respect to Encana, here is a company that was 85% gas and they talked about a year or two ago of diversifying more into oil and liquids. They are taking 20% of the financial services aspect of the Canadian Tire card receivables. It’s becoming much more competitive and let’s face it, Chinese are very, very smart buyers. I think most of these large investments and banks around the world do subscribe to Thomson-Reuters in one fashion or another. I mean they own a big chunk of the legal business as well through Westlaw and they’ve managed to diversify their sort of professional information services to a great extent. I think it’s getting to the point where we own it and we’re sort of wondering, “Okay, where are we going to sell it from here probably,” because I think it’s come up a fair amount in the last year or so and it’s beginning to reflect full value. We did own some about two years ago and sold it at that point in time and then saw it drift down. It always looks a little bit expensive but for people that have held onto it for a long period of time; they’ve tended to do very well. It’s one of about six that I have but I want to add to it, but at what price should I jump in when it’s what it is today? I don’t think TransCanada as dependent or hopeful about the KXL Pipeline as they would have been four or five years ago, but if that does come through, that will certainly be good for the stock and then that it would probably have a balance from there. I mean they’ve expanded their production and considerably, they’d seemed to be very efficient operators and very, very good buyers of assets. I think that it’s one of the up-and-coming companies in the oil patch and I would be certainly looking at it today. But buying a stock on the basis that it might be Take-out Candidate is always a little chance. Going forward, I think they are going to do more of that and so, what we’re seeing is a company transforming itself from a relatively low margin company into sort of a medium to medium margin company, I guess. When we see the railroads trading at sort of 20 times earnings and significant multiples of cash flow, I think we’re seeing that more in CP and yet CN has always been sort of the benchmark railroad in North America. But in the long run, you know, railroads can’t really grow any more than the economies in which they participate and yes, occasionally, you get bumps from all of a sudden in a commodity like oil, less pipeline capacity, therefore, more rail capacity.
Therefore, on that basis, I think that I would be willing to buy CN today just on the participation in the overall economic recovery.
Certainly, the feasibility studies of building it out further have been getting better and the last feasibility study that just recently came out so that it’s possible for it to earn 17% rate of return on investment, I guess, going forward from here. They invest in private companies but they do so in a very unique fashion and that they tend to invest by issuing preferred shares to those companies that under certain circumstances, the cash flow to Alaris keeps increasing and if they failed to meet certain benchmarks, then that can convert into equity at some point. Typically, they might be largely family-centered owned companies to some extent but they all tend to have very, very good positions in the industries. Right now, their biggest investment is about 17% of their cash flow but that will be probably reduced down to 10 very shortly. You know, Cascades, I think is a company that a few years ago, people were very concerned about the balance sheet and so on. It’s not pristine yet by any means, but it’s certainly getting better, slipped a little bit in the latest core. I guess our main thesis there is, they will continue to participate with the things that Loblaws is doing.
They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. As President, he is responsible for the firm's overall direction and investment portfolio decisions. Information presented is based on analysis of past data and assessments by the Tactical Timing System model.
Fears of slower growth have negatively impacted the emerging markets, while European markets have been shaken by events in the Ukraine. Let’s face it, we’ve been in a “bull market” now for a number of years and they just don’t go straight up all the time.
But in terms of where can you find the things that maybe you feel more comfortable, I think the Energy areas, one where perhaps we can identify one or two more stocks. I think that it’s getting close to an area where — again, if you’re a longer term thinker, you could think about buying it. The thing with buying gold stocks, you’ve got to buy them when people just don’t want them. I bought this when — a while back as you say when “it was out of favor” and in the high 30’s. Card, they have managed to sort of get their hands around management and straightening out procedures; if anything, they’re going to try to be cleaner than anyone else. On a multiple bases, I think that they do stock up pretty well relative to the competition. In their latest quarter, they really were showing higher capital efficiency, they’re under budget in a lot of areas, drilling cycle-times and the Cardium and Viking areas were improving. My opinion would be — I don’t think it’s a sell here, but I wouldn’t be jumping in to buy it right now.
I was away last week and over the weekend, I came back and it was up 11% and I was quite happy, but I couldn’t figure out quite why — it looks like they have a good first quarter and then it stopped.


And then, you get close to the annual meeting and they talk about, “Hey, let’s merge with Newmont Mining and we’ll get a billion dollars worth of synergy.” And you just sort of say to yourself, “No. And so, I think that right now, it is undervalued and that’s why we were continuing to hold on to it. Their balance sheet is much better than it was and I think that they learned a lesson there. Just after this break, we will allow Michael to talk a little bit more about Scotia and maybe Encana as well and we will come back with your questions, too. It’s not sort of involved in just one’s part of the commodity cycle but it’s also involved in the retail aspect as well. But they took a big bet on this revamp of the provision of factors in the financial services. And since then, it’s going up and I think it’s probably even past where we sold it at, but you know as activity particularly, out west(ph) picks up, that’s going to be good for ATCO. It is a company that it continually adds to it and improves their base of assets and they are the primary pipeline facility through Canada. It’s on a cash flow basis, yes, and the dividend is likely to keep going up but I prefer one or two other stocks in that sector.
I think the regulators are going to step in and that’s going to slow down as they have to upgrade the cars that the oil is shipped in and so on.
I’ve always had trouble with uranium because it’s not just a supply-demand metal; it’s also a political metal. I think that they certainly — lately, the spot prices have been weighing on the stock and the sector in general, but for uranium place, I’d almost rather find small companies or bodies that are likely to be takeovers in a way than look at just a big chemical. Sprung Investment Management Is Pleased To Offer Qualified Investors A Free Portfolio Review—Without Cost or Obligation. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision. Michael brings more than 30 years experience in the Canadian investment industry and has managed equity and balanced portfolios as large as several billion dollars. Going forward, we would not be surprised to see a pullback in Canada as fundamentals catch up with valuations. We anticipate this trend will continue and the stock will provide investors a means by which they can participate in a growing cash flow. Materials actually are becoming more interesting in here, I think, because they have certainly lagged significantly given commodity prices where they are. We own it in a lot of accounts but we have owned it for a long time and have quite a good capital gain in it. They’re one of the major players in it, in providing services to the oil and gas companies. Tourmaline is a very, very well-run company and I would say a pullback like this could almost be looked at as an opportunity.
Concentrate on the efficiencies, capital discipline, spending money on your good projects — would’ve got shorter term profitability in line. The thing about the property in the Eagle Ford though is they’re paying $3.2 billion for something that on that price looks like it should be accrued(ph) of, but it’s a very short life asset.
But Scotia now, some time ago that they were going to increase their credit card business and this was a very smart way of doing it.
I think on a multiple bases too, potash still looks a little expensive to us at these levels.
Let me follow up with a question about Barclays cutting a 7,000 people or a third of their investment banking business. They used to be primarily news and quotes and they’ve tried to upscale into a Bloomberg competitor. I think that Inter Pipeline is going to have a continually expanding rate base from here and I think the dividend is safe here. We had a real good gain on it and then, I still had some more and I had an awesome pop today.
I think that it’s such a well-run company that if I owned it, well I do own it, I will hold onto it.
I guess within the gold sector as I mentioned earlier, we own some Goldcorp and we own some Barrick, and we would prefer those relative to Kinross ourselves.
On the last couple of weeks, they have been trending downwards at a pretty good clip but they have been talking about with the Cigar Lake coming on line and demand in Japan and everything. I’ve never been that successful myself in guessing where the uranium cycle is going to go and people talk about the increasing demand.
One of them was they’re having a dispute with CRA right now, so they’ve put up a deposit on that. Their earnings today were a bit light on just lower tissue shipments and prices in tissue, but their packaging products as the economy is expanding are doing quite well. It’s at a level where we’d feel comfortable buying it again because we can see a fairly significant capital appreciation potential.
Michael can be seen as a commentator on BNN-TV and is a frequent contributor to the Canadian Financial Press. I just think that the fundamentals aren’t moving forward that quickly; the economies are not expanding that quickly. If one really believes the worries about the Canadian mortgage market and things like that, that would be one concern.
But if we were to pull back another 10%, I think we’d be quite interested in looking at it. My question is, is there anymore upside or would you sell this and buy something else in that area? We used to own Stantec in this area, but it got two levels where we thought that most of the gains have been already discounted into the stock.
Interesting deal for Apple, not usually the kind of deal that it would make, but using that gigantic cash pile to buy Beats, it looks like $3.2 billion. It’s one that we’ve certainly been following for some period of time and just because they miss on a quarter due to lower pricing on NGL’s, that’s not a reason to really bail on the stock. I said, if there’s going to be a merger of this sort, it’s nice to see it happening when the stocks are somewhat depressed, when that industry, gold prices are down.
That’s asset of a three to five-year reserve life and it’s going to be very tight to really make that work but it should be incremental within that asset value of the company. That has not gone as smoothly as it had originally been hoped and we’ve seen changes in this CEO of Thomson-Reuters since and the changes on the board. I just didn’t know what your fumes were to let it cool off and look at, picking up a little more or just stay with what I got and let it run? Another thing holding Kinross back right now is it does have some exposure to Russia and that’s sort of, I think, influenced investors and has held it back quite a bit. I’m just kind of wondering what you feel the turning point would be on the chemical and do you feel it’s a buy?
A few years ago, Japan was going to get out of nuclear, now they’re going to get back into it.
I think they have more than enough.   This is going to take a while to sort it out and in the meantime, I think they’ll have more than enough cash flow to cover whatever liability might be there. But we think that’s a little bit overblown, we think that Canadian mortgages are much safer than people outside the country generally perceive them to be. However, on a valuation basis, it’s discounting quite a good future in the short-term here.
What you hate to see is when the prices are really running and everybody says, “Oh, we’re getting lots of money. People won’t necessarily identify that right away that it’s Bank of Nova Scotia but maybe someday, they will be buying more of it in as time goes on and running up more efficiently. I don’t know if Barclays is a client or whether they’re with Bloomberg, but that kind of news can’t help?
There’s a lot of cross-fertilization they can have between the products there but they had to spin out of their choice properties. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.
If I owned it, I think I would hold on to it, but I wouldn’t be surprised if there was a bit of a lull in the Energy stocks to see it pull back. We better go buy so and so.”   They’re buying with very expensive currency and that’s usually not a formula for success.
Nothing presented here should be considered investment advice, but merely the humble opinion of the author.



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