A handful of buys

IBI Group (IBG) posted very good results last week but the stock dropped. That's not surprising, given the big run it had. Nothing would have made that stock go up (buy on rumour, sell on news, as they say). I still think it doubles over the next 18-24 months so while I sold some as it surged, I still own a substantial position and I am back on the bid.

Turnarounds have a LOT of stamina. Accumulate.

After several years of reaping the reward from New Flyer’s (NFI.TO) turnaround story, including a total return of 360%, we are selling the last of our stock.

The bus maker announced much better than expected earnings last week of 38 cents/share, which has propelled the stock higher and prompted analysts to increase their targets. But the valuation seems full and we’ve made a great return so it’s time to exit.

Let this serve as a reminder of how long a turnaround can last for.

Another turnaround story I’ve been feasting on is Polaris Infrastructure (PIF). It really took the market selloff on the chin, not surprisingly, and while it has made a couple of attempts at a recovery, running not long ago from $6.75 to $8 on big volume, the relentless selling is keeping a thumb on it.

That selling emanates from funds that used to own the bonds and now own shares as part of the recapitalization. Many of these investors are funds that cannot own equities so they’re dumping shares aggressively. You should buy the shares from them.

PIF’s contract gives it an automatic 3% price increase on the power it sells every year, and new drill holes could ramp production to 72 MW (a ~40% increase), which would produce prodigious cash flow and a rising dividend.

And best of all this story has tremendous growth potential if the drill program hits and Polaris acquires the binary unit that can increase production by 10%. Ascribing modest success to these measures we could see a future dividend that, on the current price, yields more than 25%!

The company alraedy announced a 10 cent USD/quarter dividend two weeks, meaning that at the current price the yield is almost 8%. Plus the dividend is paid in US$, which I like as a cheap way to build a balance of greenbacks (no foreign exchange fees).

The stock is cheap, trading at a large discount to hard book value, and these discounts never last long.

Once these sellers are gone this stock should march higher.

Warmest regards,

Fabrice Taylor, CFA | Publisher