Prakash Hariharan is a portfolio manager at Front Street Capital. His focus is on dividend paying stocks, agriculture stocks and fixed income.
Like the positioning of the business and the cost advantage in the sodium chlorate business. Is a leading player in the chlor alkali space in North America and Brazil. Prices have stabilized and there is earnings power as throughput increases through the Brudderheim terminal facility due to its strategic location. Business fundamentals are strong with the business in South America continuing to gain traction. Dividend yield is also priced well backed by strong free cash flow.
Made a good acquisition of Provident Energy and increased its footprint in the mid stream gathering business. Lots of near term catalysts coming up in the next few months that adds incremental cash flow from its capital spend in the last year in its Redwater facility. Had some headwinds in the near term due to excess supply of propane and compression of frac spreads, which should turn around during the back of the year. Expect some accretive growth due to positioning in the LNG and propane supply chain in Western Canada.
Glacier Credit Card Trust, Series 2012-1
This is the asset backed program securitizing pools of credit card receivables from Canadian Tire Bank. Loss rates have been range bound backed by credit enhancement and excess spreads due to low funding costs. Payment rates have ranged in the 25 per cent range, consistent with Canadian credit card portfolios. Yields on the portfolio have been strong and the corporate credit profile has been improving with the parent (Canadian Tire) posting some strong earnings numbers. At the corporate level, integration of Forzani has been accretive and provided good support to the stock this year.
Dean Foods 7 per cent bond
Undergoing a restructuring. Spinning off Whitewave business unit in an IPO.
Yield: 6.73 per cent
Yield: 5.06 per cent
Total return: +19.6 per cent
Flint Energy Services 7.5 per cent bond
Company acquired by URS Corp. for $25 at 65 per cent premium. Bonds will be assumed liability of URS.
Total return: +21.5 per cent
Total return: +9.74 per cent
Total return average: +16.95 per cent
Markets have been at the cross roads, held hostage by Government interventions and slowdown in emerging economies (China and India). Credit spreads have been tight and markets have been pricing yield to perfection, particularly with the U.S. 10 years trading at all time lows ranging from 1.45 per cent to 1.6 per cent. The market is seeing no discernable trends but any signs of reflation will provide a strong boost to equities. Historically sovereign crises followed by money printing have sown seeds of inflation and as the chorus for additional quantitative easing increase, it will create more room for inflationary pressures down the road. Beware of overpaying for yield.
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