High Liner Foods (HLF.TO)

They are a processor of seafood rather than a fisher. 3.4% yield. The US dollar is a tailwind now because of their US plants.

The numbers have all lined up as being pretty good. It looks like a pretty good overlooked name. Trading at less than 10X earnings.

He is Short a little on this and Long Clearwater Seafoods (CLR-T) on the other side. They”ve had a couple of poor quarters in that their margins are shrinking and the cost of seafood has gone up as well as having some negative currency impact.

Sells frozen value added seafood, primarily to hospitality and restaurants. Made a US acquisition a couple of years ago that did not turn out very well. The lower Cdn$ has affected their profits. Also, seafood sales have not grown with the economy in the last couple of years. The stock dropped 40% from its all-time high, so the valuation is quite cheap. Very attractive at 7-8 times earnings.

They source fish and process into fish products. They have grown rapidly and he is not happy with their debt levels. There is growing demand for fish as a protein, but the debt keeps him away from it. 3.2% yield. There may be risk to the dividend.

High momentum stocks rally very strong, and if something fails, institutional investors head for the exits, and that is what happened here. He would stay away from this.

A really interesting stock. It has gone down quite a bit in the last little while, yet it maintains all the criteria of a good investment. Steady dividend and steady dividend growth. This is a perfect storm of low Cdn$, US customer base and they are buying all their products from the US. Thinks they can earn $1.50 next year versus $1.25 this year, which is a nice turnaround. He is looking at this. Dividend yield of 3.6%.

He is not a big fan. It went up to EBV 5 line, but did not cross it. It is a cyclical. You are seeing this in the pullback. He thinks it will go lower. It is having negative transits of his EBV lines.

This kind of made a tactical error from a business point of view. When costs generally went up, they tried to raise their prices, and were somewhat surprised when consumers disagreed and their sales and earnings slowed down. This stock points up nicely if they keep their current point of view. Looking fairly attractive here at 8X estimated earnings. The upside potential, if those earnings come through, is more than 100%.

Has been hurt recently and sold off. It was presented as a ‘short’ thesis at a conference recently. It was not a good last quarter. It is a seasonal thing. It is facing problems like a lot of US importers. It buys its fish in US$ and sell it in Canadian $. It is a good cash flow generator. It has been at this debt level before, lowered it and then made more acquisitions. He is not worried about their debt. However, it needs to cut costs and improve margins. Also, however if someone wanted to buy them it would be at a much higher price.

A classic conflict between the technicals and the fundamentals. The 200 day is breached and the uptrend is breached. Also, you have lower highs. The technicals say the story is intact, but there is something wrong with it. Don’t buy new or average down. You might reduce.

Valuation is attractive, but the balance sheet, not so much. If they put together a good quarter the stock could easily be $20 again. A lot of people are throwing in the towel. If you can wait it out, it is worth it. Just watch the results.

He imagines they are shopping right now because there is money to finance an acquisition. This is an opportunity to get in. The insiders own a lot of stock so it would be a hard company to acquire.

Down $1-$2 from where he bought it, due to operational hiccups. They were moving around some of their manufacturing facilities, trying to rationalize them and it should have affected an improvement in margins, which didn’t happen. There was also a decline in volumes in their most recent quarter. The valuation is very compelling, however it has turned into a bit of a show me story. You are going to need to see volume growth stabilize and some of the synergies start to flow through.

Had one bad quarter and it seemed like the whole world was going to end for the stock. It made no sense whatsoever. Frozen food has a huge scale in North America. It generates a lot of free cash flow. Dividend yield of 2.91%.