Equitable Group (EQB.TO)

Mortgage financing when housing has cooled off. But EQB just announced they will relinquish some of their standby facilities that they took on during the Home Capital crisis last year--this will save them 25-cents a share in earnings next year and cost them a non-cash write-off. It boasts 5.5x earnings and a solid dividend. A potential for buybacks. This stock will be much higher in 2019. (Analysts' price target: $70.00)

(A Top Pick Jun. 26/17, Down 5%) They are now the largest in the industry. They are extremely well managed. They had record results and raised the dividend several times since he recommended it. It is trading below book value. It is a great value investment and is growing well despite the new mortgage rules. Customers wanting to take mortgages elsewhere are subject to the new stress tests.

Small financial in Canadian mortgage business. Stock struggling because it is in the Canadian mortgage business. Cheap stock and well run. He does not think that mortgages will be a massive problem.

Canadian Banks? He looks favourably on Canadian banks in general, because he likes the backdrop for energy. This is his favourite, and is actually the smallest of the group. Trades at the lowest valuation of the entire group. Trades at 1X Book compared to the National Bank (NA-T) at 2X. The Canadian bank trade should continue to drift higher.

It has been thriving. It is an extremely well managed and well capitalized company. Their business is growing dramatically. Buy it whenever it is below book value.

There is nothing wrong with this company’s balance sheet. The overwhelming problem with the group was the issue of whether lenders, the people who bought the GICs, etc., wouldn’t freak out and panic when some of the US hedge funds started Shorting.

(A Top Pick July 5/16. Up 14.74%.) The whole alternative lending sector took big tumbles on the Home Capital (HCG-T) situation. This is in a much better shape in this group.

It was caught up in the HCG-T issues. The short sellers started pouncing on these players. They secured loans at very low interest rates. They pre-empted potential contagion in the industry. They are getting so much new business that they can cherry pick their new customers. It is trading just above book. (Analysts’ target: $62.00).

When he asks about buying Home Capital (HCG-T), he gets “Buy Equitable”, which is way safer and has financial backing. It doesn’t do alternative lending, but does kind of niche lending. Home Capital’s problems are going to blow over, but even if it doesn’t, that is not going to come to this company. Wait for the next Home Capital headline, and then when this drops to $45, then you have more of a ramp to do something.

(A Top Pick July 5/16. Down 15%.) Believed that the model was very good. He began selling it at $60, and by the time he was done it was trading at a little above $48-$49.

It is a quality company. They have an impeccable portfolio. Their bad loans are miniscule. They got thrown in with HCG-T. He can’t say anything bad about it. Their earnings were fine when they came out. He does not think the latest budget will have any effect on them.

Very similar to Home Capital (HCG-T) in how they run things. The issue a lot of these companies face is that they are borrowing money at a retail level, which has hurt them a fair bit. Everybody worries about the mortgages, but those are probably fine. The problem is, they have to be funded and the funding is the bad part. If somebody doesn’t trust you when you are funding things, it becomes very difficult. That is exactly what happened in the US in 2008. (CEO just stated that there was no material decline in deposits, and they have just lined up a $2 billion standby credit facility, just in case.)

Assuming that the contagion is not so devastating, and assuming that they can still raise capital at a reasonable cost, he thinks this company will pull through. A year from now, many of these companies will regain their losses.

(A Top Pick July 2/15. Down 12.9%.) An alternative mortgage lender. A segment that people love to hate at the moment. There is concern that the housing market, particularly in Toronto and Vancouver, are going to explode and that mortgage lenders are going to be like the ones in the US, left for dead on the battlefield. A terrific opportunity to buy a quality company.

Mortgages. They also have a fin Tech spin to them. The fin Tech bank can get deposits that others can’t. Trading at a very low multiple, at about 7X this year’s earnings and 6X next year’s earnings. Dividend yield of 1.53%.