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Disnat GPS Report: Canadian Portfolio

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During the past year, as part of the "D" Bulletin, we have presented to you reports on various securities held within the Disnat GPS portfolios. These reports will continue to be available to our clients and subscribers in the GPS section of their Disnat account.

As part of our collaboration with the "D" Bulletin, we will be offering you a quick overview of the various Disnat GPS portfolios in the coming months.

In addition to the summary table of our position in each portfolio and our assessment of the four main Disnat GPS evaluation criteria – financial health, growth, governance and valuation – we will issue a brief commentary summarizing the current situation.

Symbol Company Name Price (at close of February 8, 2018) Financial Health Growth Governance Valuation
ATD.b-C Alimentation Couche-Tard $61.93 Reasonable Reasonable Excellent Excellent
BNS-C Scotia Bank $76.22 Excellent Reasonable Excellent Excellent
CNR-C Canadian National Railroad $93.91 Reasonable Reasonable Excellent Excellent
CTC.a-C Canadian Tire $161.21 Reasonable Reasonable Excellent Excellent
DOL-C Dollarama $154.35 Reasonable Excellent Excellent Reasonable
MG-C Magna International $67.55 Reasonable Reasonable Reasonable Excellent
NTR-C Nutrien $56.84 Reasonable Concerning Excellent Reasonable
RCI.b_C Rogers Communications $56.75 Reasonable Reasonable Excellent Concerning
TD-C TD Bank $71.07 Excellent Reasonable Excellent Excellent
TRI-C Thompson Reuters $50.03 Reasonable Reasonable Reasonable Reasonable
WJA-C WestJet Airlines $24.09 Reasonable Reasonable Excellent Excellent

Alimentation Couche-Tard

This company is solid from every point of view and we are particularly satisfied with its governance (acquisition strategy). Not only are we planning to hold this stock for the medium and long term, but we may add more shares to the position we already hold, which currently accounts for about 6% of the portfolio.

Scotia Bank

In addition to being very satisfied with the state of this company (especially internationally), we believe that the Canadian banking sector is one of the few sectors that is currently trading at relatively low multiples, due in part to a very dynamic market.

Canadian National Railroad

CN occupies a dominant position in its market. Companies of this kind (quasi-monopolies, oligopolies, etc.) are particularly well positioned to take advantage of economic strength, and often withstand periods of economic difficulty. With this in mind, we plan to keep our CNR shares for the medium and long term.

Canadian Tire

While overall retail trade has been weakened by the expansion of online commerce, we believe that Canadian Tire is relatively well protected due to its geographically diverse business and products which the Internet could hardly offer (car maintenance, gas, tools, etc.).

Dollarama

Dollarama is probably the stock that offers the best growth prospects in our Canadian portfolio. It is also the one that trades at the highest valuation multiples. We are aware of and accept this situation, and will continue to pay a particularly high price for this issue as long as the company continues to grow. If sales or earnings per share were to slow significantly a reassessment would be required but for now, we continue to be satisfied with our position in this business.

Magna International

Although the whole of the evaluation criteria seems to us to be accurate, it is the valuation (less than 10 times the earnings per future action) that shares of Magna stand out. The current price of this issue provides a great opportunity to hold a high quality business in a growing market, at a price and with a valuation that also offer some protection if the economy were to falter.

Nutrien

Following the acquisition-merger with Agrium, the company formerly called Potash and now called "Nutrien"
(NTR-C) continues, in our view, to offer an excellent way to invest in natural resources in general and in agricultural development in particular. Given our underweight position in natural resources (our portfolio does not include any other oil or mining stocks), we are pleased to participate in this sector with a global leader. For the moment, we plan to be patient while waiting for a price recovery of the various products of this company.

Rogers Communications

We only have good things to say about this company. Both its current situation and its strategic choices (investment in hockey, etc.) seem appropriate to face future challenges. Our only downside: this stock is currently valued at relatively high levels (price/earnings, future price/earnings, etc.), but as the market itself is very highly valued, our position in Rogers Communications continues to suit us.

TD Bank

In addition to being very satisfied with the status of this business (especially in the United States), we believe that the Canadian banking sector is one of the few sectors that is currently trading at relatively low multiples in a very dynamic market.

Thompson Reuters

This company is currently in transition and continues to be a world leader in the information field (especially economic and financial). This strength allows it to be one of the few companies in Canada (excluding the financial and telecommunications sector) to offer a dividend higher than 3%, which should allow its stock to continue doing well, regardless of the anticipated scenarios. The low weighting of this security in our portfolio (approximately 4%) could encourage us to increase it.

WestJet Airlines

This airline continues to perform very well and the valuation of its shares is still relatively reasonable. Stable and rising earnings per share, good dividends and realistic valuation in a relatively expensive market mean that WestJet continues to look like a bargain.

Cash

We expect to eliminate our cash shortly (likely in February 2018) by increasing some of our positions and adding new holdings to our portfolio. Whatever happens, we will notify you of any changes by a real time Disnat GPS alert.

The author

Steve Deschesnes

Steve Deschesnes

Disnat GPS Portfolio Strategist