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April 2016

Transcript: The Close for Friday, Apr 8, 2016

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https://robtetrault.com/the-close-for-friday-apr-8-2016/

Michael Hainsworth with Rob Tétrault

Michael: One other factor, the Canadian Dollar, almost a full Penny popped today as Canada created four times more jobs than estimated in the month of March. So the question becomes, “How do you put that into an investment thesis? How do you play that? Or do you? Natural Bank Financial Portfolio Manager Rob Tétrault joins us now. Good to have you with us.

Rob: Great to be here Michael.

Michael: Panic is overblown, you’ve been saying as of late to your clients. Why?

Rob: I feel that given the valuation that we’re seeing now on the market, the market has traditionally been overblown on both sides. We know that when there’s blood in the streets we should be buying and Warren Buffett has been saying it forever. I’m a firm believer of that and whenever we see an oversell, which is what I think we had in 2015 and in January and in February, it’s time to buy. It’s time to come in. And I believe that long term again we’re going to be happy we bought in February and March.

Michael: The Economist told me today that the strong jobs data could be a blimp, one month does not a trend make. Do you concur?

Rob: Well, those economists are smart, for sure so I’m not going to disagree with them, but I will say this. I think it’s going to be a signal or maybe even a TSN Turning Point, sorry, a Sportsnet turning point in the fact that the –

Michael: [Laughs] Thank you for playing the media game.

Rob: [Laughs] In the fact that the people have been on the sidelines. There’s been a lot of people on the sidelines in the past. There’s a lot of people on this show that come on and say, “I’m going to wait. I’m going to wait. I’m going to get back in later. I’m going to get back in later. Well, those people on the retail side, they’re all on the sidelines. They need to be callous for them to get back in and I think this job support may send a bit of a shiver through the people that are out. They may be saying, “Wow, it’s time for me to get back in and we may see bigger volume I think.

Michael: So, shake out some of the shorts, whether it be actual shorts or just the mental shorts.

Rob: The mental shorts, which is the people I deal with right on a day to day basis.

Michael: Oh okay. So, where would you be playing if in fact the trend is our friend, if in fact we break through that glass ceiling as I called it on Crude Oil of $40, if in fact the jobs data is improving in Alberta led us in the month of March? Where do we go?

Rob: What an amazing report on Alberta, hey. It’s just, I’d say stunning. So, where do we go? Again, if we’re going oil, you and I have had this conversation before. I believe you should be sticking to large caps. If you want to gamble, if you’re in that mood, the small caps, some of them may go belly-up but now at 40 bucks.  Michael. We’re a long way from where we were when people were panicking at $26. Aren’t we? Some of those companies are now for sure going to be profitable. I think we are breaking through that $40 ceiling and I think we’re going to see companies that are just financials. I like financials. I think we’re going to see the consumer staples are going to do well and I think we’re going to see the large cap oils do well in the coming year.

Michael: Staples? Isn’t that kind of an overplayed? I’m just going to pull it up while you give me a take on it. Largely because I thought that the run was basically done in the staple space when you look at on say a price to earnings basis? We traded 21 times even current earnings.

Rob: Yeah, I mean, again I’d like to be in the large cap sector now. I’d like to be in some quality names, such as specifically on the financial side. Why would you want to own a bank right now, right? Like why would you want to own a Royal, or even a CIBC, sort of those large names?

Michael: Or a New Flyer industries. We’ve talked about that in the past. It’s now up a 161% over the last year. Is $36.79 an entry point for the bus company?

Rob: Not for me right now, but I loved this and I’ve been on your show before and I’ve said how much I’ve loved this company. I think that acquisition of Motor Coach is going to be significantly profitable. I think there’s going to be a huge economy of skills in the coming quarter. I don’t think the market is anticipating how much it’s going to be. I think we’re going to see some cost reduction and think we’re just going to see the margins improve. I’d like to wait. I mean, it’s been running and running and running. I’d like to wait for a pullback on that one and then get in again if you don’t own it.

Michael: Well, I’m looking for some sort of sign at least from the tacticals that suggest there is an entry point at a cheaper level than now at some point in the future. But relative strength index shows the herd is fully bullish on this in a very big way as it trades now at a 52 week high.

Rob: Yeah, I feel like every time I’m on it, I’m pumping the stock at an all time high, but last time I was on it, I talked about it at $27 it was at an all time high there too. So, sometimes you’ve got to get on the train, right? If it’s running away you’ve just got to get on it and go for the ride.

Michael: Okay, so $36.79 street consensus as far as where the stock is 12 months now, still some equity upside, but largely this is more about, it looks like a dividend added to it, giving you a 6% total overturn. Does that drive with your view?

Rob: Yes, and I think we’re going to see, I think the margins are going to be better than the street thinks.

Michael: Okay. I’ve got the finance minister in the hopper here. When it comes to the stimulus spending that they’ve allocated, they’re okay with the numbers, the economists are okay with the numbers. What the moneys guys such as yourself don’t seem to be too pleased about is the lack of a roadmap to getting back to break even on the budget. Are you concerned about that, or is now the time really to be focused more on the stimulus side and worry to paying the bills later?

Rob: Well, I wish the stimulus was a bit more…I’m concerned about the stimulus for sure, and I’m concerned about the budget to be frank because I feel it’s partially imprudent spending and I’m concerned about that. I do like the fact that we’re spending and you know, we want to grow the GDP that way. To me it’s a bit of a short sighted measure. You know, it’s a lot of billions of dollars that we’re going to be short and how we are going to pay it back. I don’t like, as you mentioned, that there is no road map. When are we going to pay that back? When are my kids going to pay that back?

Michael: That will be the question for the Finance Minister. Thank you Sir.

Rob: Thanks Michael.

Michael: Rob Tétrault is a Portfolio Manager at National Bank Financial. When we come back, Finance Minister Bill Morneau.

The Close for Friday, Apr 8, 2016

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Fri, Apr 8, 2016 – 3:59 PM

National Bank Financial Portfolio Manager Rob Tétrault joins BNN to wrap up the trading day and tells us about the role economic data plays in his investment thesis, how he’s investing in oil and why he’d wait for a dip before buying New Flyer Industries.

Click here to view full video transcript.