Mike Vinokur’s Top Picks for June 9, 2025

Mike Vinokur, Portfolio Manager & Senior Wealth Advisor, Propellus Wealth Partners, IA Private Wealth

Focus: North American large caps

Top picks: Dental Corp, IAC, Cenovus

MARKET OUTLOOK:

Equity markets have had quite a rebound since the liberation day plunge and the fears about U.S. tariffs and reciprocal tariffs. While we admit that the economy has so far proven to be more resilient than we expected, we are maintaining a cautiously optimistic stance on markets. The current momentum is very strong; however, in the near term we are getting quite overbought and slightly overvalued based on our chart indicators and estimated forward earnings multiples.

The tech sector is again leading the charge and pushing indexes higher providing cover for some of the weak links within industries and sectors. In the last few weeks, we have begun to see first-time unemployment claims start to pick up in the U.S., and the level of new non-farm payroll increases ease on a month-over-month basis. Housing is also softening in terms of both sales and pricing, potentially confirming weaker economic growth in the months ahead.

While inflation numbers have been tame so far this year, they may increase owing to higher energy prices and the impact of tariffs in the second half of the year, complicating the path of lower interest rates for central banks in North America.

Q2 earnings season is right around the corner, but we are more concerned about sales guidance for the back half of the year than we are about second quarter earnings. Therefore, we are being very cautious in our equity exposure, holding a cash position of approximately 30 per cent for equity mandates.

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TOP PICKS:

Dental Corp (DNTL TSX)

An acquirer of dental practices. They currently own 570 practices and have the ability to acquire more organically through free cash flow. They have identified over 700 opportunities and are in negotiation on over 150 practices currently. At the current run rate of $160 million of free cash flow per year, the company is trading at an approximate nine per cent free cash flow yield. We believe they can acquire 40 practices per year, which should serve to increase earnings meaningfully in the next few years. We also believe that further technology enhancements deployed across their entire network of practices will allow for better cost controls and a further increase in gross margin. Insiders own a meaningful stake, and the board recently initiated a dividend, generally a good sign of confidence in future growth.

IAC (IAC NASD)

Headed by Barry Diller, an icon in media properties. This company has spun out or sold so many businesses including Expedia and most recently Angi.com. The company today owns a substantial amount of shares in MGM worth approximately US$2 billion and has close to $0.9 billion of cash on the balance sheet. Their main operating businesses, Dotdash Meredith, Care.com and a few others should generate approximately $250 MM of EBITDA. At the current trading price of approximately $36, we are obtaining all the operating businesses plus the value of their 32 per cent stake in Turo for free. This is a team that has created immense value in the past and we are convinced they will unearth value for shareholders.

Cenovus (CVE TSX)

An integrated oil and gas producer owning both refineries in the U.S. and Canada and upstream production in Canada. The company has a very long reserve life index at 29, much higher than most producers owing to very long-life reserves in their oil sands properties.

The stock is down quite a bit, we believe for several reasons:

1. Refining margins have been very low especially since the peaks of 2021-2022. But we believe are stabilising and will head higher due to low refined product inventory and refinery shutdowns
2. Wildfires in Alberta have forced some production to be shut in but will restart in due course
3. The price of oil has come down since January meaningfully

The company has a very strong balance sheet, maintains positive cash flow at $45 oil, has a growing dividend (which was recently increased), and is close to getting to the $4 billion net debt target at which point more free cash flow will be directed to share buybacks.

PAST PICKS: May 9, 2024

Johnson & Johnson (JNJ NYSE)

Then: US$149.85

Now: US$155.02

Return: 3%

Total Return: 8%

Rogers Communications (RCI.B TSX)

Then: $53.82

Now: $36.74

Return: -32%

Total Return: -27%

FedEx (FDX NYSE)

Then: US$262.06

Now: US$222.26

Return: -15%

Total Return: -13%

Total Return Average: -11%