August 22, 2016

On Monday, the S&P 500 fell 0.1% and Toronto rose 0.4%.

A big mover today was Alimentation Couche-Tard, up 7.4% to $66.78. This was due to the announcement of a very large acquisition. I have long said that this is one of Canada’s very best managed companies. Our last rating on this stockĀ  was Buy at $56.37 dated May 23.

Statistics Canada reported investments in new housing construction as of June. This is of great interest to those holding Melcor shares. The single family housing investment in Alberta in June was 33% lower than June of 2015 and 40% lower than June of 2014. There is no doubt that Melcor is selling a LOT fewer building lots. (Lot sale numbers were down 56% in Q2, but the average selling price was up 17% such that lot sale revenues were down “only” 25% and this activity remained profitable.) The shares certainly seem undervalued on the basis that they are selling at just over half of book value. But the stock market does not tend to be kind to a company with such cyclic earnings. On top of that the very low trading liquidity contributes to the low share price. I will update the report on Melcor soon but it seems clear that investors will have to be patient.