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February 2016

The Close for Wednesday, Feb 17, 2016

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Wed, Feb 17, 2016 – 3:59 PM

Air Canada CEO Calin Rovinescu told short-term focused shareholders to sell: And they obliged. Rob Tétrault, Portfolio Manager, National Bank Financial says Rovinescu should care about all of his shareholders and calls the comments “A slap in the face.”

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Transcript: The Close for Wednesday, Feb 17, 2016

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https://robtetrault.com/the-close-for-wednesday-feb-17-2016/

Michael Hainsworth and Robert Tétrault

Michael: For more on today’s market I want to take you to Winnipeg. We want to speak with National Bank’s Rob Tétrault. He joins us now. Good to have you with us.

Rob: Great to be here Michael.

Michael: A Bombardier was flying high today, didn’t make it on my top 5 list today however. How do you feel about the stock on the heels of that Air Canada order for the CSeries?

Rob: Well, personally I think the news is long overdue and any news at this point would be good news for Bombardier. They’ve struggled mightily as everyone knows. They were a $4 stock. They were in everyone’s portfolio, and now we’re seeing below a buck, some serious margin issues for anyone who is trading that stock on margins, so they needed some good news and it came from Air Canada.

Michael: And as we look at the 21.1% increase in the shares today, what do you say to an investor who’s either under water or who has seen that kind of gain? Do you lock in a profit, do you cash out at this point, or do you ride this higher?

Rob: I would be cashing out. This is not a stock that I like long-term or short-term. I like to sell here on the news. They made, was it 20 cents today, so that’s enough for me to get out, a good time to get out. I don’t like the prospects of the company long-term, that they’re bleeding cash like crazy. They’re not going to be profitable in 2016 in my opinion. Can they compete long-term with the CSeries Jet?  They haven’t sold one in a year and a half almost. So, I’d be getting out.

Michael: All right. What about going a little further up the food chain and going with Air Canada itself?

Rob: I’ve never been a believer of airlines and I can thank my father for that and my grandfather. They’re of the Warren Buffet mind that the only way to make money with airlines is not to own them. So, I’ve never been a believer in airlines and I’m staying away from it, and today, just shocking news in my mind is Rovinescu’s comments to the investors. Not sure why he would say that. To me it just strikes of trying to go all in to a poker game with a pair of sixes when you know you’re beat. I just don’t like that move at all today.

Michael: Oh you’re talking about that line where he said if you’re a short-term investor you’re more than welcome to sell the stock? And it looks like they did.

Rob: Yeah. I mean, what you should care about Rovinescu is all your investors. Whether they’re short-term, long-term, medium-term, you need to care about everyone, anyone who owns a stock at that particular moment. And he clearly slapped them in the face today and they called his bluff. And you know what? The stock’s down 10%. Good for him. He should learn a lesson. That’s not the way a CEO should behave in my mind.

Michael: What do you care about? What’s interesting to you right now in this crazy market environment, Rob?

Rob: Well, I’m really interested in oil. I really like financials. To me there’s an amazing opportunity right now. Anyone who’s panicking, anyone whose losing sleep over the market right now, it’s time for you to call your advisor and to make sure that you know what some of the amazing buying opportunities that are out there and specifically I like financials. If we’re talking energy I’d stay away from the small caps and mid caps personally, I’d touch the big names. But I’m buying. I’ve been buying here for the last two weeks. We’d been buying cash for our clients. We’d been suggesting our clients invest. I do not know where the bottom is, I’m not a bottom picker as you recall, but I do know that somewhere near here in my mind there will be a bottom in the next…whatever it is, three, six, nine months. In the long-term in 2017, 2018, 2019 we’ll be glad we bought in February 2016.

Michael: Okay what’s giving you the buy signal at this point? Because so many of my past guests said, “I’m happy to lose 3, 4, 5, 10% upside just to confirm that the bottom is, on oil specifically, in this conversation.

Rob: Well, if we leave oil aside, if we’re talking about oil specifically, I’m not jumping in to oil. Firstly, because I am scared of oil, because commodities are something that doesn’t behave in a rational manner, a lot less than the market do. So, when it comes to that specific commodity, you know there are analysts to track it and I personally like to focus on something I understand, which is numbers, balance sheets, profitability, dividend earnings, so I like to focus on that, and we’ve got companies now that are trading at multiples that they should not be, financials, I like REIT that have corrected significantly right now. I may be wrong on the bottom and I’m acknowledging that. I do not know where it is, but I do know that long-term I’m going to be happy to get paid that dividend, specifically if we’re talking financials, banks, I’m going to be happy to collect that dividend in the short to medium term while this market starts to become rational again. And once it does, in my mind there will a capital appreciation. Now I don’t know if that’s in three months or six months but I do know that long-term I’ll be happy that I bought financials around this time.

Michael: Okay so just for clarification, you’re not recommending oil stocks either at this point, or are you saying you can buy oil stocks at this point? Because most of that is bought under water as far as cash costs against the barrel itself.

Michael: Yeah. So again, I don’t know, I don’t like the commodity play specifically. If you are doing oil play, I’d stick to the larger caps. I know there’s less upside. I get it. There’s less upside. But there’s also significantly less risk. We may see bankruptcies in those small to medium caps but we will see bankruptcies in the small caps, in my mind, and we may see bankruptcies in the medium caps. So, if that’s a play you want to make, I mean, just be aware that it could go very south. But there’s obviously a lot of upside. You can’t have it both ways. You can’t have your lunch and eat it too, right?

Michael: Rob good to have you with us. Thanks for your time.

Rob: Thanks for having me.

Michael: Rob Tétrault. He is a Portfolio Manager at National Bank Financial. He joined us from Winnipeg.