Richard Fogler, managing director at Kingwest & Company
Focus: North American equities
Top Picks: Brookfield Corporation, Uber Technologies, Secure Waste Infrastructure
MARKET OUTLOOK:
From 1995 to 2015, real gross domestic product (GDP) per capita in Canada and the U.S. mirrored each other exactly. Since 2015, U.S. incomes increased at a historic rate, while Canada has been static. The result: Canadian incomes are now 20 per cent behind the U.S. today. Did we Canadians become stupid?
This is well known data. We expect our new Prime Minister Mark Carney will make correcting this problem his chief priority. We like Canada.
In the U.S. everything depends on U.S. President Donald Trump. His first hundred days have been characterized by his daily whims on trade, creating uncertainty among consumers, businesses, and investors.
But his people say the next hundred days will be characterized by trade deals and tax cuts. Trade deals are all up to him, so probably better. Tax cuts — a positive. So hopefully the U.S. outlook good.
To be clear, at Kingwest we are long term owners of strong businesses, not short-term investors who depend on our ability to predict an unknown future. But that’s our view – we don’t rely on it for investment decisions.
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TOP PICKS:
Brookfield Corporation (BN. TSX)
Brookfield Corporation stock is very attractive.
The stock trades at a 40 per cent discount from its current value, is growing at a 15 per cent plus clip, and it trades at a substantial discount to its U.S. peers.
Brookfield Corp has a market capitalization of about $110 billion today. The company owns roughly $100 billion of the stock in its publicly listed affiliates. It has another $40 billion in investments in its managed funds, carried interest owed to it by BAM, some of the highest quality trophy office properties and retail malls and Brookfield Wealth Solutions a mega billion-dollar insurance company.
The substantial discount to today’s value combined with the growth in the business suggests BN stock could potentially double in price over the next four years.
Uber Technologies (UBER.NYSE)
Uber Technologies is the world’s leading rideshare and delivery platform. It benefits from industry leading scale, data and network effects. Its unique position gives Uber an unmatchable value proposition both for consumers as well as for drivers and couriers.
Uber’s dominant value proposition has driven bookings to grow 20 per cent per year since 2019 to $162.8 billion in 2024.
Outstanding leadership by CEO Dara Khosrowshahi has re-positioned the business for rapid cash flow growth over the next few years. Not only does it continue to grow in its long-standing markets, but also Uber is entering new markets and launching new products to drive the business forward.
Despite the enormous scale, there is lots of potential ahead. Ridesharing accounts for less than one per cent of all kilometres driven in the U.S. today, concentrated in large urban centres.
Uber should generate 30 per cent plus cash flow growth per year over each of the next few years. This should drive the price substantially higher. The price gain might be even more if investors accord Uber a multiple expansion.
Secure Waste Infrastructure (SES.TSX)
Secure operates in western Canada with 55 waste processing and transfer facilities, 12 landfills, 12 metal recycling facilities and 3 oil pipeline systems.
Secure has always been considered an Energy Services company but it’s really a Waste Business. The company is transitioning from energy analysts to industrial analysts which should drive a more realistic valuation for the stock.
The company has an entrepreneurial culture driven by co-founder who remains chairman with $30 million equity investment in the business. SES has strong pricing power — five per cent per year expected over the next couple of years. Acquisition opportunities abound in metals recycling — we expect $100 million of mergers and acquisitions in 2025. And the company announced an issuer bid of six per cent of outstanding stock on April 8.
The existing business is growing at the rate of the economy, add to that a chunk for acquisitions, another chunk for share buybacks. The stock is cheap at 10 times free cash flow.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BN TSX | Y | Y | Y |
| UBER NYSE | Y | Y | Y |
| SES TSX | Y | Y | Y |
PAST PICKS: September 11, 2024
Apollo Global Management (APO NYSE)
- Then: $108.67
- Now: $139.24
- Return: 28%
- Total Return: 29%
GFL Environmental (GFL TSX)
- Then: $55.31
- Now: $67.65
- Return: 23%
- Total Return: 23%
CI Financial (CIX TSX)
- Then: $17.54
- Now: $31.24
- Return: 78%
- Total Return: 81%
Total Return Average: 44%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| APE NYSE | Y | Y | Y |
| GFL TSX | Y | Y | Y |
| CIX TSX | Y | Y | Y |
