Aecon Group Inc (ARE.TO)

(Market Call Minute.) This has gone up very high, but still cheap relative to its five-year average. Thinks there is a lot more in the tank.

A very consistent company over time, and construction is relatively consistent. This is all about their future book. They have debt outstanding. Sometimes the market gets really worried that they have debt, but he thinks it is a very solvent company. It seems hard for the company to grow dramatically, so in really bad times, he is able to buy the bonds with about an 8% yield. Any time the stock is $9-$10, it is interesting, but on a risk/reward basis, where he can buy the bond at 8% it is an incredible way to invest. He just sold his bonds which he felt were fully valued.

They do infrastructure building and lots of that is happening in Ontario. It is in an upward trend, broke to a new high and is outperforming the Toronto market. Stick with it.

Element Financial (EFN-T) or Aecon (ARE-T)? Two different things. One is a financial player and this one is involved in industrials, being a construction company. The company has started to turn itself around. If the Canadian government comes through with the $30 billion+ of infrastructure spending, this company should be able to get its fair share.

If you like the development area and you want to be in the Canadian side with a government that is much more interested in fiscal stimulation, subways to be built, etc. this is not a bad time. Thinks they are going to do extremely well.

If the world’s governments are going to do anything in the next 5 years, it is going to be infrastructure. He likes this play. His model price is $16, but he would love to get it back at $13.60, and he would be a buyer.

Sell Crombie (CRR.UN-T) and buy Aecon (ARE-T)? REITs have had a long time to be able to move higher and higher in terms of valuations. Probably not a bad time to be making a switch, but be careful of moving to Aecon because it has also moved considerably. You probably want to Buy this under $15, where the PE is about 14.3X on a forward earnings basis. This is going to be a direct beneficiary of infrastructure spending in Canada.

(Market Call Minute.) They are really levered heavily to spending in the Alberta region, which might get a bit of a lift off the fires. They need to get margins higher, and that has been a bit of a struggle.

One of those great Canadian names that is benefiting from that trend of becoming a $1 billion company. Have a massive backlog, which is up over 50% year-over-year. Valuation is reasonable at 6-6.5X EBITDA.

(Market Call Minute.) Great story. There is more in the tank.

This has had a great run. He sold his holdings too early. They have good positioning in the Canadian construction market. However, it is currently fully valued. Well-run company for the long-term, but wouldn’t necessarily buy it today.

(A Top Pick June 10/15. Up 32.85%.) He likes this and the whole space a lot. Has just added to his holdings recently. This is going to be a beneficiary of future infrastructure. (See Top Picks.)

(Market Call Minute.) This is more of a trading stock. They have a backlog that has picked up quite nicely due to infrastructure spending that is happening. If you can get this cheaper, that would be great.

Aecon (ARE-T) or Stantec (STN-T)? A great Canadian stable company. He uses it as a dampening mechanism in his portfolios. There is a lot of infrastructure to be done. A great, consistent business. Every time he has made an assessment of these 2, he has gone with this one. The stock is now at the higher level of his valuation, so he owns the bonds.

At these levels, he would be cautious. Just reported quite good earnings. Getting some very strong revenue from their nuclear work with SNC Lavalin (SNC-T) on the Ontario Hydro Bruce facility. Also, the energy backlog is quite good. They have some good potash work. Have executed well.