Q: Hi 5i,
Just mulling over how to punch up a part of my TFSA that's not done much for me lately and is looking like it might do even less in the next year or so:
Specifically, I'm considering the wisdom of selling all the CTS I hold (at a fairly sizable loss) and replacing it with either NFI (which seems to be trending in the right direction, share price wise) or DCBO (which might be at a good entry point right now) in the expectation that by making this move in a year's time I'll be ahead of where holding CTS would leave me.
So, boiled down, is selling CTS now sensible, and is either NFI or DCBO a good replacement and, if so, which one is likely the better replacement?
And if neither, could you suggest another?
Thanks for your thoughts.
Peter
Just mulling over how to punch up a part of my TFSA that's not done much for me lately and is looking like it might do even less in the next year or so:
Specifically, I'm considering the wisdom of selling all the CTS I hold (at a fairly sizable loss) and replacing it with either NFI (which seems to be trending in the right direction, share price wise) or DCBO (which might be at a good entry point right now) in the expectation that by making this move in a year's time I'll be ahead of where holding CTS would leave me.
So, boiled down, is selling CTS now sensible, and is either NFI or DCBO a good replacement and, if so, which one is likely the better replacement?
And if neither, could you suggest another?
Thanks for your thoughts.
Peter
5i Research Answer:
We think CTS still has potential from current levels. The question is do the other two have more potential. NFI is a highly leveraged, highly cyclical company. It faced a lot of financial trouble not long ago. Things have certainly improved, and investors love a 'back from the dead' story. But it is pricey and risky, and with CTS at 8X earnings and having a more consistent, higher-margin business, we would prefer CTS. DCBO, on the other hand, could offer more potential, IF things go well. But its last quarter was a disappointment, and it may be in the penalty box for a while. We think CTS looks best here, for now. We think TVK, PRL, GSY, HPS.A might all offer better returns than any of the others discussed above.