From the Desk of Irwin Michael – January 22, 2016 Although we have admittedly migrated to a number of good valued American common stocks, we still believe there are selective, attractively priced Canadian stocks that are: Debt-free Free cash-flowing High $U.S. revenues with low $CAD costs (currency leverage) Trading below replacement cost Underfollowed by analysts Potential takeover candidates Polaris Materials, a significant ABC Funds holding, is a prime example of a deeply undervalued and misunderstood common stock. For instance, Polaris Materials reported yesterday its annual business update and 2016 outlook. Polaris, which owns, develops, and operates aggregate quarries on Vancouver Island, British Columbia and primarily exports to the California market via ships announced: A 10% increase in Q4/2015 shipments versus Q4/2014 No long-term debt Year-end cash balance of $14.5 million Canadian Positive cash flow in Q4/2015 Continued margin improvement A benefit from low energy prices, which improves its competitive positioning “The weak Canadian dollar benefits gross margins as sales are almost entirely in U.S. dollars while quarry cash operating costs are primarily in Canadian dollars.” With regard to Polaris’ 2016 forward outlook, the company also announced that it: “is in advanced discussions with a number of potential customers in Los Angeles, San Francisco and other markets outside of California which could drive incremental volumes at attractive margins.” And “recently secured tenure over a hard rock deposit (Black Bear deposit) in close proximity to the Orca Quarry.” Overall, we believe these announcements are quite favourable and portend excellent tailwind trends that should positively impact Polaris over the year. Irwin A. Michael, President I.A. Michael Investment Counsel Ltd.
