Let’s do this thaaaaaang.
Not only do I look like Matthew McConaughey but I sound like him too! What are the odds?
Genworth Mortgage Insurance
Genworth MI Canada (TSX:MIC) is in the mortgage default insurance business. You know how Buffett is always telling y’all to buy wonderful businesses? This fits the bill.
The borrower pays up to 4% for the insurance that protects the bank in case they default on their mortgage. Default rates nationally have historically been well under 1% (more like 0.2%) and Genworth gets to invest the premium in the meantime. Genworth regularly does 50% net profit margins. It’s an amazing business.
It’s not all sunshine and blow jobs though. Mortgage growth is expected to be pretty tepid in 2019, and there’s always the risk of the Toronto/Vancouver housing markets blowing up. I don’t believe such a thing happens, but the risk is there. The good news is Genworth is well protected if certain markets go down the toilet. And even after the recent run-up it’s still attractively priced at less than 9x forward earnings and right around book value.
This is one of these stocks I avoided for years because I was worried about housing. I could have bought it five years ago and compounded my money at 9-11% (depending on whether I reinvested dividends). So I’ll do the next best thing and buy some in February.
Northwest Healthcare REIT
Northwest Healthcare REIT (TSX:NWH.UN) owns medical office buildings, hospitals, and seniors living facilities in Canada, Germany, the Netherlands, Brazil, and Australia/New Zealand.
There are a few things I like about this company. It basically has limitless growth potential, including the potential to crack the U.S. market at some point. Management is doing a good job expanding in a way that actually increases the bottom line, something a lot of REITs aren’t very good at. And it can get higher cap rates by focusing on different markets. The Brazil hospital division is a good example.
But I’m not a big fan of the latest Australian acquisition, which saw it acquire 11 properties at a 5% cap rate. And the stock already trades at a premium to book value, which is never something you really want to see for a REIT.
Shares pay a 7.4% yield.
I already own this one and I’m down a little bit from my purchase price.
Cineplex Inc. (TSX:CGX) has a dominant position in Canada’s movie theater market, owning about 80% of the sector. Despite Netflix and other streaming services gaining in popularity, Canadians are still going to the movies and they’re still stuffing their faces with that delicious popcorn. Oh baby. If I had one of those popcorn machines I would be 400 pounds and die a happy man.
There are some negatives. Cineplex is in the process of installing those recliner seats in its theaters, which will cost a significant chunk of money. And it’s dependent on Hollywood continuing to put out good movies. 2017 was a terrible year, but the traditional movie industry redeemed itself last year. And 2019 will have the latest Star Wars movie, which will put some asses in seats.
Cineplex has consistently grown by 5-10% a year, and I think it keeps that up.
Canadian National Railway
Canadian National Railway (TSX:CNR) is one of those businesses I wish I understood better five years ago. I missed out back then but I don’t think I will again.
CNR transports most of the stuff that feeds our economy. It has tracks through every major Canadian city and even through Minneapolis and Chicago in the United States, all the way down to the gulf coast. When you have that kind of network it’s super easy to pass on price increases to your customers.
And CNR has a very comfortable duopoly position with CP Rail here in Canada, which should ensure steady profits for each.
CNR shares aren’t exactly cheap today (17x forward earnings) but I like the business enough to look past that. And with the big recent dividend increase shares are close to a 2% yield. I’m going to expect big dividend increases going forward, too. And the company also has a nice share buyback program.
I have to add SNC-Lavalin (TSX:SNC) to the watch list. After all, it’s down 20% in the last month alone.
One analyst says its ownership in Highway 407 (that’s a toll road going through the middle of Toronto) is worth about $30 per share with the rest of the business making up a measly $6 a share. But there’s a lot to not like about the engineering/construction business, never mind the fact SNC always seems to get into trouble with various governments.
The good news is the business is growing, albeit at a lumpy pace. The company has a robust pipeline of both domestic and international work. It has a nice current yield (3.1%) and more than a decade of consistent dividend growth behind it. And a toll road going through Canada’s largest city is a hell of an asset. And if you look over the last decade the $35 level has been a great time to buy. It turns out SNC fucks up a lot.
Royal Bank (TSX:RY) and Toronto-Dominion (TSX:TD): I feel like I gotta own these things, y’know?
Inter Pipeline (TSX:IPL): It’s still pretty cheap and I like its diversification into polypropelyne (not sure if that’s the right spelling but screw it). I already own a couple hundred shares.
TransCanada (TSX:TRP): Still relatively cheap and yields 5%. And I like the pipeline business a lot here. Fine, don’t build any pipelines. I’ll just enjoy the profits from the existing infrastructure.
Molson Coors (TSX:TPX.B): Beer is a fantastic business and I can buy this stock for a big discount versus its peers.
And that’s about it, kids. Any stocks you’re looking at this month?