Latecycle Portfolio: November 2019 Purchases

I added five stocks to my portfolio the past month: Canwel Building Materials, Pembina Pipeline, Emera, Fortis, and Brookfield Property Partners.

Canwel Building Materials (CWX)

  • CanWel is a national distributor of construction materials, building products and a supplier of pressure-treating lumber in Canada.
  • It serves an intermediary role in the construction materials supply chain. It made several acquisitions in the past five years, which have improved margins, scale and organic growth outlook.
  • The company boasts high insider ownership (roughly 20%) and management continues to make large insider purchases.
  • Revenues have been increasing since 2013 and estimated to continue growing. Adjusted EBITDA also growing since 2013 and estimated to grow.
  • The payout ratio was a little high from 2016-2018, but is now at 70% and estimated to decrease to 60%. Free cash flow per share is has also been increasing since 2016.
  • Overall, a combination of increasing metrics stated above, significant insider trading, and a 10% yield at this price ($5.60) is attractive.
Source: RBC Capital Markets

Other purchases:

  • Emera and Fortis are strong, long-term holds whose valuation peaked last month. With the recent dip and continued uncertainty in the markets, I felt this was a good time to add safety to my portfolio.
  • Pembina Pipeline was oversold at $46 and is another long-term energy play. The purchase of Kinder Morgan adds fuel to the fire (no pun intended).
  • Brookfield Property is my entrance into the real estate market. This stock has lagged its Brookfield peers (Infrastructure and Renewables most notably). With its 7% yield and relative value to NAV (~25%), I feel this is a good time to buy for the long-term. While most other REITs have gained the past year, there is no doubt BPY has some catching up to do. Like most professional investors, I trust the Brookfield name and their management team to provide value, even if the share price takes some time to appreciate – I can sleep at night knowing the dividend is secure.

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