KeyStone’s Stock Talk Podcast Episode 136

This week we start our discussion with a new U.S. ETF that has been getting a great deal of attention. The VanEck Vectors Social Sentiment ETF (BUZZ) – apparently the ETF is able to “cut through the noise of millions of online conversations to identify stocks with bullish investor sentiment.” And trade them. We will give you our thoughts.

Our Case For / Case Against debate is back to take a look at TFI International (TFII:TSX), a North American leader in the transportation and logistics industry, operating in Canada and the U.S. Brennan argues the bear case, Aaron has the bull case, and I sit in as judge, jury, and executioner.

In our YSOT segment we answer a listener question on Cameco Corporation (CCO:TSX), one of the world’s largest uranium producers. The company’s shares have performed well at the start of 2021, following renewed optimism in the nuclear power market after doing little but decline for 10-years. We will let you know if the move is sustainable.


TFI International (TFII:TSX)

Current Price: $90.77

Market Cap: $8.5 Billion

 What does the company do? 

TFI International is a North American leader in the transportation and logistics industry, operating in Canada and the U.S. It operates in the Package and Courier, Less-than-Truckload, Truckload, and Logistics segments.

Against Case:

  • Topline Revenue growth has stalled, coming in at $3.48B in 2020, 2019 and 2018 and after fuel surcharges, revenue has actually declined 4% over the past three years.
  • Profitability margins are increasing, but this continued margin expansion is not sustainable over the long term to drive a stocks share price.
    1. Diesel Retail Fuel costs have increased over 30% in the last 5 months alone, which could put negative pressure on margins in the future.
  • TFI has a lot of debt on their balance sheet, coming in with a net debt balance of $1.2B. And with the recent increase in prime rates, TFI’s debt service is likely to become more expensive in the future.
  • Currently trading with an EV/EBITDA multiple of 14x – showing that TFI is rather expensive considering the business offers no topline revenue growth. And how much further can margin expansion lead to growth going forward with no topline growth.… not much in my opinion.



Cameco Corporation (CCO:TSX)

Price: $20.23

Market Cap: $8.036 Billion

What does Cameco do?

Cameco is one of the world’s largest uranium producers. The company’s flagship McArthur River and Cigar Lake mines are located in the Athabasca Basin in Saskatchewan, Canada

Recent News – Driving Share Price Gains

The stock has gained 42% in the past 6-months. We believe that the energy transition theme is feeding into increased investor interest in nuclear power, combined with the potential that the new Biden Administration takes a more friendly stance towards the sector. This

could provide nuclear utilities with increased confidence to return to the uranium term-contracting market. In our view, the challenge for investors is assessing the time frame over which this evolving scenario could play out.

In the interim, the uranium market has started off the year quietly and the spot price has slipped below the US$29/lb level for the first time since April 2020. Pricing environment currently is not great.


What are we looking for in a great investment?

Historically strong revenue growth, a path to revenue growth going forward. Profitable growth with the potential to increase profit margins overtime. A strong or well managed balance sheet. In the case of the growth, we look at whether or not it is organic or from accretive acquisitions (skillfully executed). Many other factors, but these give us an idea as to whether the business has been well run.

In the case of Cameco: over the last 4 years revenues have declined. Operating profits have gone from $237 million to a loss of $40 million last year. Not inspiring performance.

An investment (or in this case bet), on Cameco comes down to where you think the nuclear power market will be 5-10 years. And in your confidence in management’s ability to manage its mines and grow long-term. If you are positive on these, then it could work to your favour. The operating performance over the past 5-10 years gives no indication the company is worth investing in. Again, it is a bet on uranium long-term which is uncertain and Cameco holds mine specific risk. If one was bullish on nuclear power long-term spreading a bet out over a Uranium ETF might be a better bet rather than on a company that will face more losses in 2021.

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