Element Fleet Management (EFN.TO)

At today’s price, you can wait on the sidelines. Eventually when the split happens, you will get the majority in the form of a leasing company and the balance will be a spinoff, which could create some uncertainty. You will then be open to pick and choose which particular company you would like to own.

If people think there is going to be a slowdown in the global economy, this impacts a company like this in a big way. This is the headwind they are facing right now. A tailwind for them has been the US$, which has kind of reversed course. They have a great asset, and you can Buy it on the cheap now if you believe that we are not going to go down to 1% or a negative GDP growth. Announced plans to split into 2 separate companies, which creates an incredible amount of value. ROE potential of their fleet asset will really shine through, and are not getting credit for that right now because of their combined entity.

(A top Pick July 8/15. Down 23.63%.) A leasing company. Made a big acquisition of some of General Electric’s (GE-N) leasing products. They got DVR rated, so their cost of funds has come down. He can see good growth for them in the US.

(A Top Pick June 1/15. Down 22.08%.) There is a restructuring coming. The stock was $19 a year ago, and now they are doing a restructuring to get value out, and the uncertainty has created a bit of angst. When it comes, you could see mid-$20 valuation on a break up.

His one-year target would be $19-$20, back where it was a year ago. When they announce the end of the deal, and earnings continue to come through, he thinks it will be fine and a good stock run up into the fall. Dividend yield of 0.68%.

It appears to be breaking the downtrend and is breaking a neckline. This consolidation around the current price, if it gets broken, looks pretty good. He is looking at it.

He knows this is well-liked on the street, but every time he looks at it, it doesn’t work for him. If you have a longer-term view and you really like the name fundamentally, it has limited downside. The chart shows it is running in a band, so you could buy it at the low end at around $12.50-$13.00. If this were a trading account for him, he would probably be taking profits.

Earlier this year they announced plans to separate the company into 2 entities. One is a fleet business and the other is asset management. Thinks we are on the verge of a major re-rating on the back of this split. Both businesses are high quality and will both generate high ROE’s. The company is largely undervalued on the back of this. Dividend yield of 0.65%.

Likes the value they are going to unplug by splitting the company in 2. They will be a fleet business and an asset management business in September. They will disclose the pro forma numbers in August. Last quarter management guided that the fleet business will earn about $1.12, but could actually be $1.10. If you use a 15 or 16 time multiple, this is what the stock currently is at. Even if you don’t like the commercial side of the business, it is probably worth at least $3, so you can easily get to $20 and above on a valuation. After the split, they will materially increase the dividend. Dividend yield of 0.68%.

Has owned this in the past. Watching it closely. Announced they are going to spin the company into 2 different parts. When that happens, you typically see a fair degree of shareholder value created. Once they spin out the 2 different divisions, you will probably see the sum of the parts being greater than what it is right now. Longer-term there is lots of room for them to grow the different sides of their businesses. Can see it being higher in 5 years than what it is now.

(Market Call Minute) He sold a lot at the end of the year. Their earnings look pretty good. They are splitting the company in two.

(A Top Pick April 15/15. Down 16%.) Last year, when investors were worried about higher interest rates in the US, the stock took a hit. Earlier this year they decided they were going to split in 2 to bring out value. That will probably take all year to complete, but the stock is worth holding onto.

This is a well run, but economically sensitive company, sensitive also to rail cars. Transportation is weak in the summer months. It has a very long support level. It is at the top of its trading range. Exit and come back in in the fall.

(A Top Pick May 28/15. Down 21.55%.) This is splitting into 2 businesses. He continues to like it. There is a real opportunity on the leasing side as well as the fleet business. You are really buying more of a US company, because that is where the business is growing.

He is currently studying this. They have proposed to separate the company into 2 parts, a fleet management business and a commercial side. He would be more interested in the fleet management business which would give more predictable revenue and cash flow. He wants to see the balance sheets of the 2 new companies before doing anything. There may be a tendency to layer on more debt on the more mature business.