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Expanding the universe of potential winning investments

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June 17, 2014 – Comments (11)

Oh Canada...

Recently I have been making an effort to expand my universe of potential special situations and interesting investment opportunities by trying to learn more about investing in other countries.  I have decided to go the easiest route and focus on Canada first.  I have spent the past two days (no not all day of course, just tiny pieces) getting my Global trading account operational and converting my U.S. dollars into Canadian dollars, so I'm ready to roll.

I decided to start with Canada in my foray into foreign-listed stocks  for a number of reasons, including the fact that I already hold stock in two TSX-listed companies, albeit in U.S. listed OTC shares rather than in their home market.  Those companies are Extendicare (EXETF) and Canexus (CXUSF).

Furthermore, while Canada really was not previously on my investment radar, business news for Canada is readily available and better yet... usually in a language that I actually speak.  I just bookmarked the business sections of the Globe and Mail and the Financial Post and have already found some great articles there.

I noticed some unusual trading activity with Canexus recently, it was up 5% yesterday, so I decided to do some research on it this morning.  As a refresher for anyone who is not familiar with the company:

Canexus Corporation is a Canadian chemical company that produces a number of what seem to me as fairly commoditized chemicals, sodium chlorate and chlor-alkali. What's interesting about the company is that it us in the middle if expanding one of its Canadian terminals so it will be able to accept and transport oil and other liquids from drilling operations in the area. There as been a log jam in Canada created by the delay in approval of the Keystone pipeline project. A lot of the oil from drilling has to be transported by rail. Canexus can significantly expand its EBIDTA when the project is complete. Issues with this rail terminal expansion have crushed Canexus' stock.  By purchasing shares, I placed a bet that the company will eventually get the situation straightened out.  As a bonus, I'm getting paid a 7.8% dividend to wait for them to do so.

This morning I came across an article in the Financial Post on Canexus that was likely the cause of the recent move in the stock.

Canexus Corp assets would attract plenty of buyers

http://business.financialpost.com/2014/06/17/canexus-corp-assets-would-attract-plenty-of-buyers/?__lsa=ad4a-8289

CIBC World Markets recently published a report stating that Canexus should consider selling its assets.  Specifically they said:

"'While the stock lost almost 50% over the course of the last year as a result of cost overruns at its North American Terminal Operations (NATO) near Bruderheim, lowered expectations and subpar earnings results, we still believe Canexus has significant potential in the right hands,' Mr. Bout told clients, reiterating a market weight recommendation and $6 price target on the stock."

CIBC's sum-of-the-parts analysis, which I always love, pegs the value of Canexus at $4.40 to $8.80, versus a current share price of around $5.  That's 12% downside versus 66% upside.  I like those odds.


A Canexus' Bruderheim truck-to-rail terminal

Thanks for reading everyone and if you have any interesting special situaiton ideas for the U.S. or abroad I'd love to hear about them.

Have a great day!

Jason

11 Comments – Post Your Own

#1) On June 17, 2014 at 12:12 PM, awallejr (81.50) wrote:

The dividend alone makes this an interesting pick.  Nice find.

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#2) On June 17, 2014 at 12:43 PM, TMFDeej (99.32) wrote:

Thanks awallerjr.

Jason

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#3) On June 17, 2014 at 12:50 PM, Mega (99.96) wrote:

Hey Deej, here's an idea north of the border.

Senvest (SEC.TO) is a private equity company that trades at a discount to NAV. http://www.oddballstocks.com/2013/04/anyone-can-invest-in-this-above-average.html

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#4) On June 17, 2014 at 12:53 PM, Mega (99.96) wrote:

It has gone up since that post, but the discount is still over 15%.

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#5) On June 17, 2014 at 2:44 PM, TMFDeej (99.32) wrote:

Interesting.  Thanks for sharing Mega.

Jason

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#6) On June 17, 2014 at 2:45 PM, portefeuille (99.60) wrote:

TKMR is still my favourite Canadian stocks.

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#7) On June 17, 2014 at 2:49 PM, awallejr (81.50) wrote:

I actually found that global warming article in Deej's link interesting.

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#8) On June 17, 2014 at 4:52 PM, TMFDeej (99.32) wrote:

In my continuing research on potential Canadian investments I came across a company called Exchange Income Corp. (TSX: EIF).  This is a relatively small conglomerate that produces parts for the airline industry, tanks (no not army tanks) and cell towers.  Exchange's shares were punished several months ago when it realized that it could not keep up with a large cell tower contract that it signed with AT&T, forcing it to bring in outside contractors for help and hurting margins.  The issue has since been addressed and the stock has only partially recovered.  It currently yields 7.4% and pays on a monthly basis, like many Canadian stocks.

Battered dividend-paying small cap on the road to recovery

http://www.theglobeandmail.com/globe-investor/investment-ideas/potential-turnaround-keeps-exchange-on-investors-radar/article19102628/

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#9) On June 18, 2014 at 2:09 AM, valunvesthere (< 20) wrote:

Investors can bypass foreign currency exchanges, time zone barriers, languages, laws, etc. by investing in foreign corporations listed in the United States stock exchanges like in Nasdaq, NYSE, Over The Counter, and etc.

 

Some examples are:

HDFC Bank Ltd.(NYSE:HDB) Foreign Regional Banks

ICICI Bank Ltd.(NYSE:IBN) Money Center Banks

Infosys Ltd.(NYSE:INFY) Technical & System Software

Mahanagar Telephone Nigam Limited(NASDAQOTH:MTENY) Telecommunication services

Rediff.com India Limited(NYSE:REDF) Internet Information Providers

Dr. Reddy's Laboratories Ltd.(NYSE:RDY) Drug Manufacturers - Other

Sify Technologies Limited(NASDAQ:SIFY) Internet Service Providers

Tata Motors Limited(NYSE:TTM) Auto Manufacturers - Major

Wipro Ltd.(NYSE:WIT) Information Technology Services

Some examples of worst case scenarios are:

Videsh Sanchar Nigam (NYSE:VSNL) Telecommunication services controversy of sale of company to Tata Communications by Indian Government

Satyam Computer Services (NYSE:SAY) Information Technology Services falsified corporate financial accounting

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#10) On June 18, 2014 at 7:28 AM, JonCartoon (< 20) wrote:

if invest money,only in progressive company,like APCL. They grow health marijuana, and in USA now thats legal. they shares will grow. you can see that in http://goo.gl/gqtv6p . 50 cent today, 1 dollar tomorrow, this is obvious, isnt?

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#11) On June 18, 2014 at 7:29 AM, BogdanBB (< 20) wrote:

Here is another example of the company's investment www.fvpharma.com, for example, I bought their shares vsegodnya $ 100, just want to see how to behave in the company

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