Stephen Takacsy, Chairman, CEO and Chief Investment Officer of Lester Asset Management
FOCUS: Canadian actions
MARKET OUTLOOK:
Volatility has increased significantly in 2022 due to a confluence of factors. The investment environment remains highly uncertain due to the consequences of the pandemic, rising interest rates, high inflation, labor shortages and supply chain disruptions. which have worsened due to the war in Ukraine and, more recently, the confinements in China. As a result, both the stock and bond markets have undergone significant corrections. There is no doubt that rising rates and high inflation will slow down the economy, some parts more than others (i.e., high-priced discretionary real estate and consumer goods).
Canada and the United States should be able to design a “soft landing,” as they come from a good place with low unemployment, large savings, still low interest rates, and strong currencies. We believe that the inflation rate will slow down as the economy slows down, supply and demand for goods will be more balanced, supply chains will normalize, and central banks will end the cycle of tightening sooner. than expected.
However, we remain well diversified in recession-resistant businesses (Telcos, Pipelines) and those that benefit from strong thematic winds such as renewable energy (Boralex, Northland Power), demographic aging (CareRx, Savaria, Park Lawn, Siena Senior Living), and the digitization of everything (select technology companies). We’ve also been adding high quality companies whose prices had been significantly corrected, such as Cargojet, Canadian Tire and WSP Global.
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BEST SELECTIONS:
Stephen Takacsy’s best options
Stephen Takacsy, President, CEO and Chief Investment Officer of Lester Asset Management, talks about his best options: Savaria, Jamieson Wellness and Boralex.
SAVARIA (SIS TSX)
Savaria is a world leader in home accessibility products and patient care. It manufactures and sells home stairlifts and elevators, as well as patient handling systems and ceiling lifts for long-term care centers. Last year it completed the transformative acquisition of Handicare in Sweden, making Savaria the largest player in accessibility equipment in the world. He hopes to achieve significant synergies in both revenue and costs with this acquisition. Savaria has a record portfolio and has set a target of $ 775 million in revenue and $ 120 million to $ 130 million in EBITDA by 2022, a 20-30 percent increase from $ 20 million in 2021. Shares they have been reduced by more than 30 percent from their peak. with a certain compression of time margins, providing an excellent entry point for such a unique, well-managed and growing business. The company now trades at 10x EBITDA and pays a 3.5 percent dividend. Demographic aging and the desire to live longer at home will provide strong headwinds for the business for many decades to come.
JAMIESON WELLNESS (JWEL TSX)
One of our newest positions, JWEL, is Canada’s number one consumer health brand in vitamins and supplements with a 25% market share. The company has been growing both sales and profits organically since its IPO five years ago, gaining market share in Canada, increasing its export sales and launching new products. JWEL has increased its EBITDA margins by more than 22% thanks to volume growth and production efficiency. Last week, JWEL announced the acquisition of Nutriwise in the U.S. at around 9x EBITDA, providing an excellent platform for them to grow south of the border. Stocks used to be very expensive, but the valuation has come as the stock price has gone down in combination with the growth in earnings per share, providing a great entry point to this unique high quality company.
BORALEX (BLX TSX)
One of the fastest growing renewable energy producers in Canada with a strong presence in Quebec and France. The company had long-term energy production contracts, mainly in wind, solar and hydraulic. Last week, Boralex announced that it has won contracts to build five solar farms in New York State for 540 MW, which will increase its energy production by 20 percent. Additional wind contracts in Quebec and France are expected to double BLX’s production capacity by 2025. BLX is well positioned to benefit from Europe’s desire to move away from Russia’s fossil fuels and increase renewables. IPPS valuations have fallen sharply since last year and this represents a major entry point into a world leader with high quality assets, a solid project portfolio and several decades of wind in the fight against climate change.
PAST SELECTIONS: June 23, 2021
Previous selections by Stephen Takacsy
Stephen Takacsy, President, CEO and Chief Investment Officer of Lester Asset Management, talks about his previous election: Guardian Capital, CloudMD and Stella Jones.
GUARDIAN CAPITAL (GCG.A TSX)
- Then: $ 30.47
- Now: $ 30.98
- Yield: 2%
- Total return: 4%
CLOUD® (DOC CVE)
- Then: $ 1.88
- Now: $ 0.54
- Yield: -71%
- Total Yield: -71%
STELLA JONES (SJ TSX)
- Then: $ 44.38
- Now: $ 36.13
- Yield: -19%
- Total yield: -17%
Average total return: -28%
GCG.A TSX YYY DOC CVE NNN SJ TSX YYY