Flexibility in U.S. and Canadian Markets: A Wall Street Transcript Interview with Philippe Hynes, CFA and President of Tonus Capital Inc.

Wall Street Transcript

67 WALL STREET, New York - February 8, 2013 - The Wall Street Transcript has just published its Investing in Canada Report. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Canada - Long-Term Investing - Canadian Dollar Investing - Value Investing

Companies include: The Chubb Corporation (CB), Canadian National Railway Comp (CNI), Norfolk Southern Corp. (NSC), Family Dollar Stores Inc. (FDO) and many more.

In the following excerpt from the Investing in Canada Report, an experienced portfolio manager discusses his investing methodology and top stock picks:

TWST: In terms of the Canadian market, what are some of your favorite investment ideas right now?

Mr. Hynes: Having the flexibility of doing both Canada and U.S. is important for me, because the Canadian market has been, in my opinion, overvalued for quite some time. Last year it underperformed the U.S. markets, but I still find that most of the companies that meet my criteria, and given what I look for, there's a large portion of the Canadian market that is outside of what I consider a great long-term company.

Mining companies and E&P oil companies don't typically meet these criteria, so I don't really look at these companies. When I look at the industrial, consumer, financial companies, most of the time I can find a cheaper U.S. company with the same quality or better. So right now a larger portion of my portfolio is invested in U.S. companies than Canadian.

I own an insurance company, Chubb (CB), in the U.S., and there's a somewhat comparable company in Canada, Intact (IFC.TO). Intact trades at 2.1 times price to book, and Chubb is at 1.3 times price to book, so a big difference in valuation on the Canadian side. CN Rail (CNI) reported yesterday, and CN trades at 10 times enterprise value to EBITDA, and Norfolk Southern (NSC) trades at seven times EV/EBITDA, so again, a big premium for the Canadian company.

Another example I found is with the dollar stores. Dollarama (DOL.TO), which is the only Canadian public dollar store, trades at 21 times earnings, and Dollar General (DG) and Family Dollar (FDO) both trade around 14 times, 15 times. For quality Canadian companies there tends to be a premium over U.S. companies, so because I have the flexibility to do both markets, I'll buy the U.S. company usually if it's trading at a lower valuation. So right now, I have a bias toward U.S. companies because of pretty good valuation from a valuation standpoint...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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