You've got to give him credit for perseverance. As can be seen, it remains the 3rd largest holding in his fund. GLTA
TOP PICKS
MERUS LABS (MSL.TO)
A former top pick that has been unfairly hit alongside Concordia and Valeant, despite virtually all of Merus' revenues originating from Europe, compounded by tax-loss selling. GMP has the stock trading at 3x free cash flow in Fiscal 2018 when the company will realize the full benefit of the tech transfer of its Sintrom drug manufacturing from the U.S. to Europe. Merus' closest peer, Alliance Pharma (APH.LN), trades closer to 10x free cash flow. Merus has a solid balance sheet and a very low cost of debt, roughly 3.75 per cent, to pursue its organic growth strategy. We have also seen a recent increase in insider buying of the stock. Our one-year target is $2.00 while our three-to-five-year target is $5.00, assuming they execute on growth.
TOP HOLDINGS AND WEIGHTINGS
1Burford Capital LTD: 3.34%
2Delphi Energy Corp 10% Cel Notes: 2.13%
3Merus Labs International Inc: 1.85%
4Mentor Graphics: 1.81%
5Corby Spirit and Wine Ltd: 1.66%
MSL-T2016-12-22TOP PICKJames Hodgins
This has been a Top Pick in the past, and he has been wrong, but with the end of tax loss selling there should be a change. They are getting the benefit of a technology transfer for manufacturing of one of their main drugs, Sintrom, from the US in US$ costs into Europe in Euro costs. That is going to take place over the next 2-3 quarters and will save them about $8 million a year. They can reinvest those savings. Their next targeted acquisitions are for drugs with an organic growth profile, something they have lacked in the past. Trading at 3X cash flow, and their closest competitor trades at 10X cash flow. There has been recent insider buying by both the CEO and a couple of board members. (Analysts’ price target is $1.84.)
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Price:
$1.080
Subject:
SMALL & MID-CAP NEUTRAL INVESTING
Bias:
UNKNOWN
Owned:
Yes