Hits and misses of 2012

Benj Gallander and Ben Stadelmann
Thursday, January 10, 2013

It is always a fascinating process to look back at the preceding year and see how our choices have fared. As usual, there were both hits and misses.

Featured first was TeamStaff, under the banner, “Can TeamStaff pull it together in 2012?” Unfortunately, it only pulled downwards. Featured when sitting at the $2 level, it now rests around 80 cents. Not even a name change to DLH Holdings can hide the fact that this play has been an abject failure.

Faith still indicates that there is a potential for lots of upside. The backlog is $153 million, revenues were up 21 percent year over year in the last quarter and the loss shrank to $354,000, less than a tenth of the same period last year. The market cap is a tiny $7 million for a company with revenues around $50 million.

A takeover is not out of the question. Right now, though, the company has to focus on getting the stock price over a buck, or it could face delisting in the summer.

Bombardier was our next topic, and another that has been disappointing, falling around 15 percent. The delay in the CSeries planes, combined with the negative cash flow, rattled many in the investment community. Fortunately, orders for both planes and trains have been steady and that should bolster cash flow. The company remains a buy in our estimation.

The telecommunication scene in New Zealand was featured towards Valentine’s Day. Telecom Corporation of New Zealand and its spinoff Chorus Limited were analyzed. The former is up a bit since then, with the latter slightly shrivelled. Worth noting is that NZTCY has been paying a fat dividend, and Chorus joined the party with a yield of over 8 percent expected for 2013.

ATS Automation was covered next. This pick was also Benj’s choice for the The Globe and Mail’s “My One and Only” competition. It is up about 5 percent since then, nothing like the potential we feel exists. Currently sitting under $9, we envision this as possibly heading over $20.

In March, Benj headed to California to not only do some dreaming, but check out some corporations. One already in the Contra portfolio was Integrated Silicon Solution, then dancing at around $11.25. The initial sell target of $18.89 on this one has moved further away as the stock price slipped to the $9.30 range.

Management has made a couple of acquisitions since the article, and it remains unclear how successful those takeovers will prove to be. It does warm the heart that the enterprise remains cash rich with zero debt sullying the balance sheet.

April featured an article on what we called “condomania.” Our feeling about this sector, especially buying in Toronto and Vancouver, was “that this has turned into a mug’s game.” Better prices for buyers are likely ahead. As an aside, TO is uglier and diminished for the vast, seemingly unplanned condo expansion. It is unfortunate that the city powers place developers and their pockets ahead of quality of life.

Next to go is likely Ontario Place, described on its website as an “internationally-acclaimed cultural, leisure and entertainment parkland.” It looks like it will be replaced with a hotel/condo retail development and/or casino. How unexciting! It is difficult to remember the last time something cool was created for the people like a great park or interesting place to go.

In May, we covered our two elders in the President’s Portfolio, Service Corporation and Stewart Enterprises (STEI). Both of these giants of the death care industry have done well, up more than 25 percent while providing reasonable dividends. The former was finally sold for a gain of 207 percent after being held for more than a decade. STEI still has terrain to cover before the initial sell target of $9.24 is reached.

Shaw Communications was also highlighted in May with the title, “Shaw good option for cautious investors.” It has proven better than that, with a gain of about 10 percent and a lovely payout to boot.

A Canadian company that trades on the on the NYSE Amex was our focus in June. Alpha Pro Tech, a company that specializes in disposable protective apparel, thrives on the possibility of health disasters like SARS, H1N1 and Hurricane Katrina. It has moved up smartly since the article and remains on the buy list with a potential double from this point conjectured.

In July, we covered Intertape Polymer, a company we picked up at $2.66. Soon after, it dabbled with bankruptcy pricing at 39 cents, but after a beautiful recovery, it now sits in the $9 range, about a buck higher than during the summer. We think it could double from here, but some handsome quarters are necessary.

RioCan Real Estate Investment Trust was trading near $28 when it was our topic in August. Since then, there has been little stock price movement. But the company has been active, continuing its real estate expansion, raising money from debenture sales and increasing the distribution, while paying them out every month.

CEO Ed Sonshine is certainly not resting on his laurels. The target range to sell is $30 to $32, so a little pop from here could see it dumped from the portfolio.

So yes, definitely a mixed bag to be sure. What will 2013 bring?