Published: December 31, 2024
By: Benj Gallander
Oh my, another year is almost in the rear-view mirror and, with one-quarter of this century gone, it feels as if life is just disappearing. It seems that just yesterday people were cowering about the end being nigh as 1999 turned into the new millennium, and fear over Y2K was all the rage. As is normally the case, the threats were greatly exaggerated, and all that dread was for naught. Thankfully.
Now, at the close of 2024, the time has come to see how our stock picks for The Globe and Mail have done. We have included a bit of the end of 2023 and ignored anything from October of this year on. That is simply too recent.
As 2023 was ending, we wrote about why a stock at a price point we normally eschew seemed like a buy, that being the Bank of Nova Scotia (BNS.TO). It was sitting under $60, and we stated that “an initial sell north of $80 seems reasonable.” Lo and behold, the stock crested that target. The gain has been supplemented by a dividend that remains north of 5 per cent. Bull’s-eye!
BlackBerry Ltd. (BB.TO) is a stock that we have played numerous times since 2013. Overall, it has proven quite profitable. But after his last sale, Ben stepped onto the sidelines on this one. Perhaps Benj should have too. He went to the well one more time in December of 2022, at $4.33, which was below the $5.25 mark it was trading around when we penned about it a year later. The stock price has remained weak, but it perked up recently with BlackBerry’s sale of Cylance to Arctic Wolf. Benj plans to stick with his position and hopes that the strategic alternatives – read “sale” of the company – mentioned in the past will come to fruition. That would likely be at a premium to BlackBerry’s current trading price.
In January, we traversed the globe to cover China Automotive Systems Inc. (CAAS), which was trading just north of US$3, miles away from our initial sell target of US$8.64. Less terrain needs to be traversed now as the stock trades around US$3.90. We remain bullish as the company continues to tick virtually all of our boxes, including selling to a who’s-who of manufacturers that include Citroen, General Motors, Stellantis and Volkswagen. The book value north of US$11 is sexy, and last summer China Automotive Systems spun out a juicy special dividend of 80 US cents. The company’s revenue continues to trend upward, reaching almost US$600-million last year and up 19 per cent, year over year, in the most recent quarter. Meanwhile, prospective investors should beware of the geopolitical risk and questionable accounting rules in China.
In February, we went aviary with Bird Construction Inc. (BDT.TO). Acquired at $4.70, it has performed magnificently, and parts of our holding have been sold in four chunks, with the most recent leaving the nest at $31.63. We are waiting for the next elevated price migration to finish unloading this warbler. This has been a huge win, and it would be lovely to sell the remainder before Benj alights on the bird watching wonderland of Point Pelee, where he has gone numerous times before.
Next up was cryptocurrency and how Benj is avoiding it. This conforms with his mantra of only investing in positions that have been around for at least 10 years. He is not contra crypto like Warren Buffett and Charlie Munger, but the fact that it is newish and impossible for him to chart an exit price makes it outside of his swing range. It was the same thing with marijuana companies and a large part of the tech world back in its flying days.
Meanwhile, the younger generation, Benj’s son Caellum, has been making out like a bandit with bitcoin as it maps out all-time highs. Benj is glad that someone in the household is. Benj remains of the opinion that people should remain wary of this alternative asset, and he feels that Ark Invest chief executive officer Cathie Wood suggesting that bitcoin could hit US$1.48-million by 2030 is simply bogus hyperbole and irresponsible. As we wrote, “Yes, in some ways crypto is a religion. And there are few things more exhilarating than belief.”
Pan American Silver Corp. (PAAS.TO) was the highlight of our next column, a stock that effectively fell into our lap when it teamed up with Agnico Eagle Mines Ltd. (AEM.TO) to purchase our holding of Yamana Gold. Phil wrote that the “disconnect between the stock price and the corporation’s underlying assets is vast.” Apparently other investors agreed as, at that point, it traded around $34. At $35.24, part of the position was exited. It has since cooled off to around $30.
April’s focus was Extendicare Inc. (EXE.TO), and it was not because we are looking ahead to what could be our future residence in our dotage. This is a demographic play with the aging population. The stock then traded around $7.25 and paid a luscious dividend of 4 cents a month. The company is expanding, which, if done correctly, should fortify the bottom line. Insiders should benefit, too, as they own almost 14 per cent of the stock. Trading around $10, the initial sell target of $13.34 is still some distance away.
In May, we went big with Lloyd’s Banking Group PLC (LYG). It is headquartered in London and has been around since 1695. Bailed out by the British government in 2007 as the financial crisis took hold, and again a few years later, it has since recovered remarkably, albeit the stock price has not. Trading when the article came out at around US$2.75, it remains near that price. Our target is double this level.
Alcohol jumped into the picture in June, 2023, with expanding Corby Spirit and Wine Ltd. (CSW.A.TO) announcing that it would acquire Ace Beverage Group in a huge transaction that fundamentally changed Corby. While giving the enterprise access to Western Canada and the fast-growing ready-to-drink category, a whack of debt was added to the balance sheet. The jury is still out on this transaction and the stock price has remained range-bound. Meanwhile, the fat dividend of about 7 per cent will be imbibed with pleasure.
In June, there was more alcohol in The Contra Guys’ glasses with Brazilian based Ambev SA (ABEV), founded in 1885. The concern was trading at not quite half of its book value of north of US$6.00. Nominal debt of US$620.4-million relative to cash of US$3.84-billion, revenue north of US$15-billion and earnings year after year that suggest little trouble in the forecast. The wild card is being based in Brazil; the government could pull a nationalization fast one. In addition, the country’s currency is taking a beating. President Luiz Incio Lula da Silva’s health is also a question mark, as he recently had emergency brain surgery. Ambev pays a sporadic dividend. With the share price currently slumming just south of US$2, we remain bullish.
In August, Ben showed his fanship for United Guardian Inc. (UG). Around since 1942, this outfit regularly pays a dividend albeit the amount varies. From cosmetics to pharmaceuticals, this small enterprise with zero debt is regularly profitable. His latest accumulation of the position was at an average price of US$10.03 with a target price around US$24. Now it sits south of US$10.
The continuing turnaround at Mattr Corp. (MATR), formerly Shawcor, was our next topic in September. Mattr has been undergoing major changes, having divested its oil and gas business to focus on units that serve customers in the industrial, energy, infrastructure, communications and transportation sectors. The market has not been excited, and the stock price has languished. We are less enthusiastic about it too. Still the initial sell range is from $20 to $25, better than double the current price. The target is being reevaluated for possible downsizing.
September featured RPC Inc. (RES), an oil field services provider that has a wide geographic footprint. Bought at US$4.16, it traded at US$6.45 when the article was published, a little above where it is now. The initial sell target is US$21.24. Revenue last year was $1.47-billion, and it is another of our debt-lite enterprises at US$34.2 million.
Anything written after September is still too early in the percolation stage. Those stocks will have to wait for their turn next year. That will arrive quickly enough, we are certain.
And remember, as Marthe Troly-Curtin said, “Time you enjoy wasting is not wasted time.”