Investments

I apologize for being a little tardy but here’s the commentary I submitted to BNN and Globe & Mail for my Market Call Tonight appearance on Wednesday night. I have also provided a link to the Report on Business online article which has a link to the video of the Top Picks. Market Outlook We have come through a very turbulent few weeks in the equity markets and the question in the forefront of investors’ minds is whether or not we have seen the last of new all-time highs in the indices for a while. My answer is that we have NOT, particularly as we enter the historically strongest six months of the four year US election cycle. The six months from November to April of the year of the mid-term election, as measured by the S&P 500 return, has greatly outpaced any of the eight six month periods in the four...

Last week, I was asked by a couple of clients if I was concerned about the fact that October was coming because October is ALWAYS such a horrible month for the equities market. There is no doubt that there have been a few very notable Octobers that have been absolutely horrible months for equities. Now approaching 100 years ago, the Great Depression was sparked by the market collapse of October 1929 and I can certainly remember the fear that my clients and I had on October 19, 1987 when the S&P 500 Index fell over 20% in a single day. More recently, the 2008 financial crisis encompassed an October decline of 16.8%. You would think that these three Octobers alone would be enough to make October the worst month for equity markets but that is not the case. The chart below, courtesy of Yardeni Research, shows the average monthly return for the...

To give credit where credit is due, the following analysis is based on the commentary by a gentleman by the name of Gary Morton who brought this line of thinking to me in an article that he wrote for the website “Seeking Alpha” on August 9, 2014. Factoring in the 7 for 1 stock split in June 2014, Apple set a new all-time closing high yesterday with a close of $100.53, just shy of the all-time intra-day high of $100.72 set on September 21, 2012. However, as you are probably aware, Apple has added significant amounts of cash to its balance sheet since that time and has used some of that cash to re-purchase over 500 Million shares of its own stock. This accumulation of cash and retiring of shares impacts the “Enterprise Value” of the company. The enterprise value of a company is determined by taking the market value of the...

I have written and spoken about Tourmaline Oil Corp. (TOU-TSX, $55.70) many times, including the last issue of The Lato Letter. This time I thought I would let the company speak for itself. Tourmaline’s President and CEO, Mike Rose, was interviewed earlier today on BNN’s Business Day. You can watch that interview at the following link. You can also have a look at the Tourmaline’s latest slide presentation by clicking the following link to their website. Tourmaline remains the heaviest weighting on the Canadian side of Padlock’s portfolios and after watching the interview and reviewing their presentation, I am sure you will understand why. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice. To receive The Lato Letter by email from now on, please click here....

Thought I would share the notes with you that I provided to BNN for my appearance earlier today on Market Call. If you missed the show, you can retrieve it from the Library section of this website or on the BNN website. Market Outlook There is still enough healthy skepticism among investors to remain constructive on longer term - 2 to 3 years - market outlook. Valuations have risen but so have earnings. Seasonal factors may not be positive but that should not dictate remaining investments in solid, properly valued equities. Low yields on interest rate alternatives and the increased risk to investors’ capital in the longer term bond market further favour equities. Top Picks Gilead Sciences (GILD-NASDAQ) Owned by clients only. Initiated position late April at $72.60, latest purchase couple of weeks ago at $81.79. The stock has a compelling valuation at less than 11 times 2015 earnings with outstanding pipeline providing strong earnings...

On last night’s appearance on BNN’s Headline and the Top One segment, I featured Tourmaline Oil Corp. (TOU-TSX, $54.60) as my Top One in the Canadian market. Here’s a link to the segment in case you missed it. Tourmaline Oil is a bit of a misnomer since 85% of its production is natural gas. The company was created in the fall of 2008 with equity capital of $300 million, went public in the fall of 2010 at an equity value of around $3.0B and is now valued at just over $11.0B; but the growth is far from over. Tourmaline has a tremendous management team led by Mike Rose, an incredible land base with the largest land position in the Deep Basin, thousands of drilling locations in its future and cash flow and free cash flow that is ready to explode. The chart below shows a company estimate of 120,000 boe/day of production this...

Normally April 30th (this year actually May 5th) marks the deadline for filing the necessary documents to complete your personal income tax return. Things are a little different this year and there has been a great degree of confusion regarding the form that makes it different. The form I am referring to is called a T1135, a Foreign Income Verification Statement, and it must be completed by anyone holding greater than $100,000 of foreign investments. Before I discuss this form, let me be perfectly clear that I am NOT giving tax advice and that you should contact your tax advisor or the Canada Revenue Agency (CRA) with any questions or decisions regarding this form. Back in January, I wrote to my clients that those clients owning more than the $100,000 limit of foreign investments must complete the T1135 by April 30th and the T1135 information requested at that time was extremely cumbersome...

The following is an expanded version of my post-Market Call Tonight appearance write-up that will appear in the online version of the Report on Business on April 11, 2014. Market Overview In spite of the recent volatility in the equity markets, Padlock remains constructive for the balance of the year. After a very strong year last year for equities, investors should expect more muted but positive returns for the balance of the year. Valuations remain favourable, as do monetary conditions. It may be five years from the market bottom but overall equity market conditions do not suggest a market top but rather the continuation of a long term secular bull market. These views will be expanded in the Spring Quarterly issue of The Lato Letter that will be sent out next week. Apple Inc. (AAPL-NASDAQ, $523.48) Apple’s valuation continues to be compelling as the stock is held back by the market’s desire for new...

I have mentioned my wife Virginia’s fashion business in previous issues of The Lato Letter and so I thought I would share a little press that she received today in the fashion section of The Toronto Star. Enjoy reading. Stealth Shopper: Yes Virginia majors in luxurious leathers By-appointment-only shop owner Virgina Lato offers chic, elegant merchandise to the over-35 set from her homey location in Rosedale. Yes Virginia, an appointment-only retailer in the lower level of a Rosedale house, is both comfy and discreet, Rita Zekas writes. By: Rita Zekas Special to the Star, Published on Wed Mar 05 2014 Yes Virginia, 44 Gibson St. Intimidation factor: Minimal. The shop is chic but homey, only fitting considering it is in the lower level of a Rosedale house. Number of salespeople on floor: Three, owner Virginia Lato and two associates. Response time: Immediate. Lato offers me a cappuccino, water, tea...

We investors may have been a bit spoiled after an outstanding year in 2013. January greeted us with some volatility and weakness. Discussions about the fabled January Indicator began to ensue. The common perception is that the price action in January sets the tone for the remainder of the year. Statistically, that is indeed the case when considering all years from 1901 to 2013, with up Januarys leading to a 9% return and down Januarys leading to a 1% return for the next 11 months. An excellent report from JP Morgan’s strategist Thomas Lee last week dug deeper into the numbers and the highlights are shown in the text and charts shown below. Lee’s work shows that the January effect is muted when the market is already in a bull market as we are in early 2014. January’s price action does have an impact but historically up Januarys in bull markets have...

Padlock Investments is ready to take on your investment portfolio. Ask us how!