Element Fleet Management (EFN.TO)

Likes this. Had a great break out early this year. He loves base breakouts. Also, fundamentally it is a good company. He likes to see if he can buy this on a bit of a pullback, so this might be ripe for a small pullback. If it pulls back it is probably a great buy.

It is a rarity in the Canadian space to have such a great company and a well known CEO, Steve Hudson. He likes the space that they are in and the spreads that they can make on their business.

One of the best management teams in Canada. They are working on a very, very big acquisition. They are growing quickly. Economic and interest rate scenarios are excellent for them right now. It is a management bet. You have to buy it and hold for 5 years and see what they accomplish.

(A Top Pick June 11/14. Up 48.48%.) Thinks this is going to do again what the market is assuming they are about to do, which is to grow by accretive acquisition. It is the most obvious buyer for the General Electric (GE-N) fleet and probably one of the big contenders for the GE rail. If they were to do both of them, at expected multiples, you would get an accretion of roughly 25%. If the stock just keeps the multiple that it has had before the announcement of the issue, you would get $22.50-$23 a year from now. His one-year target is going to be $23. Thinks they will start a dividend a year or 2 out.

They just did an issue to get cash for acquisitions. They may do a deal with GE for their capital business. You can certainly see it go higher from here.

Have done a phenomenal job of filling a gap that the banks left in 2008. The stock is up off a refinancing deal they did. It scores in the top 10% for him. He holds it strictly on a momentum basis. There is talk they have a big acquisition lined up and that should push the stock higher.

(A Top Pick July 10/14. Up 26.45%.) Trading near the top of his range. This was a benefit of having a non-bank financial in Canada, as well as having the benefit of having 75% of its business geared to the US. Made a great acquisition which is performing fairly well. Good management.

(A Top Pick May 2/14. Up 27.37%.) A financial leasing company. Have made some more acquisitions. They are the logical buyers of General Electric’s (GE-N) fleet business which GE is putting up for sale. If they were to do that, he expects there would be another 5%-10% bump. He is looking for $19-$20 a year from now.

They generated a lot of revenue from fees and he needs to know the source of them. He needs to know it is not a play on credit ratings just so you get a lower cost of funds. He would suggest you keep it if you hold it. Keep an eye on the sectors they are in. They are well managed and well positioned.

Management understands this business very clearly. There is a good opportunity for them to grow. Just made an acquisition in the US, which will help them grow in the US a lot more. Because of what happened in the financial services industry in 2008, there are a lot of gaps in the leasing side of the business, and he thinks there is a great opportunity for them to come in and scoop up a lot of business and grow. A great growth story over the next several years in the US, and a little bit in Canada.

This has made a lot of money for a lot of investors over the past 20-30 years. Brilliant management. This is also an economic call. You have low interest rates and a good economy, so for a leasing company it is almost perfect. They can finance attractively and are not going to lose a lot of money when leases go bad. They are into almost anything that moves, such as rail cars, transportation companies, etc. Have done lots of leasing and have grown very, very fast through acquisitions, and have mentioned a dividend for next year. As they grow into that 1^st dividend, he thinks a lot more investors will start to pay attention. Growth rate is looking very, very good. Earnings per share this year should grow very nicely. They are economically and interest rate sensitive, but he thinks both of those are positive for them right now. Trading at 17X earnings, which is very, very attractive.

One of the few financials that he likes. Specialty finance. They are an emerging leasing leader in fleet management, rail finance, commercial/vendor finance and aviation finance. There is accelerating earnings growth. Trading at 12X next year’s earnings. He sees substantial upside here.

Primarily a fleet leasing company. He likes it because 75% of their new originations are coming from the US. The railcar side is an interesting aspect. They can basically refurbish them, write off the costs and it is a tax advantage to them. Stock has had a good run. They have indicated that they are going to institute a dividend. A bit ahead of itself here, so he would wait for a pullback.

Announced a new Chairman today. The chairman is now separate from the CEO position. Pretty strong organic growth. Earnings growth in the 30% or better range. 16 times this year’s and 12 times next year’s earnings. They won’t pay cash taxes for a long time. He has had it for a couple of years.

This is a very much a leveraged play on economic activity. If you think there is a slowdown coming out west, because of oil prices, you might want to wait.