The Lato Letter: Volume 5, Issue 3

The Lato Letter: Volume 5, Issue 3

Following Don Lato’s appearance on Market Call Tonight last night the following was published in the Report on Business Online Edition:


Three top stock picks from Padlock’s Don Lato

Special to The Globe and Mail

Published Thursday, Jan. 28, 2016 11:09AM EST

Last updated Thursday, Jan. 28, 2016 11:09AM EST

Don Lato is president of Padlock Investment Management. His focus is North American equities.

Top Picks:

Apple (AAPL.O)

Latest purchase in early January at $98.56.

Apple continues to be the largest holding in Padlock’s portfolios and was a Top Pick in my last BNN Market Call appearance in October. The stock has struggled since then, and last night’s earnings release won’t change that in the short term. One of the key points in the release was the service revenue within the Apple ecosystem that grew at 24 per cent year-over-year but seems to generate little value for the shareholder at this point. With cash of $39 (U.S.) per share and with earnings expected to be $9 plus this year, the stock is trading at a distressed security multiple of less than 7.0X ex-cash. This company is not Research In Motion; own the stock, collect your dividend — which will most likely increase in April — and check the price a year from now.

Aecon Group (ARE.TO)

Latest purchased in early January at $14.88

Aecon Group currently enjoys a multi-year backlog, and although it has derived 55 per cent of its revenue from Western Canada over the past year, it is well diversified beyond the energy sector. Current contracts, such as the Eglinton cross-town project, should produce strong profit growth in 2016 and 2017 with analyst earnings per share consensus for 2016 at $0.94 and growing to $1.21 in 2017 (or just under 12.0 times 2017 earnings at the current price.) With the new Liberal government’s pledge to boost infrastructure spending, Aecon could be one of the leading beneficiaries of over the next several years, resulting in solid returns for its shareholders.

Parex Resources (PXT.TO)

Latest purchased in early January at $9.04.

This recommendation is not a call on the short-term price of oil but the expectation that oil prices will be higher in the future and that the financially strongest energy producers will stand to benefit. Although Parex’s cash flows have suffered along with the rest of the industry, they have still managed to deploy that cash during 2015 to increase their

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.

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