February 20, 2013

Markets fell today on fears that the FED would stop buying back bonds and interest rates would rise.

Well, maybe that is a legitimate reason for the market to fall but I am not so sure. Interest rates are at record lows and I don’t think the P/E ratio on the market indexes is too high for thee low rates or even somewhat higher rates. The end of FED bond buying would also signal some return to a more normal state of affairs. Personally, I just can’t see panicking and selling overtime the market might fall. It always might. But long term good companies rise in price.

Toll Brothers fell 9.1% after lower-than-expected earnings and lower-than-expected home deliveries. Both were above last year but lower than expected. I have been saying that Toll Brothers looked expensive though I did hang onto my shares. I expect to update the report by Sunday.

Constellation Software is down to $115. It has fallen in recent days and weeks from the $124 level. When I look at is recent press releases I don’t see any bad news. It will releaase earnings March 7. It is always possible that the market has detected a negative report coming. But I do not see cause for alarm. I don’t particularly plan to buy at this point but I would be more inclined to buy than sell.

I expect Canadian Tire to release earnings before the open tomorrow (or at least by end of trading tomorrow). This my largest holding. I own it because it looked like it was bargain priced to me. But earnings reports are always unpredictable. I certainly have no idea of what might be in the works. Generally I expect that they had a decent Q4. The credit card portfolio should have done well. The stores, I can’t predict but see no big reason to be worried. The wild card might be if they announce some cost-cutting efforts (unfortunately these are usually associated with costs for severance) and how the market might react to that. By the time most of you read this, we will likely know how things turned out. The conference call is scheduled for 4:30 pm so that may mean the release is after hours instead of pre-opening. I find it rather bizarre that they would issue a press release about the conference call and not indicate the time of the earnings release. This seems to be standard but dumb practice.

If the stock happened to drop several dollars or more on bad news I would be inclined to buy but I would also want to first be aware of the news.

On the positive side if they happen to announce any strategic moves like selling real estate or the credit card operation or a heavy share buy back then it could rise in price.

If there are no surprises in the earnings news then I expect the stock might rise a bit but not much as the market is going to be waiting to see the impact from Target though that won’t really be apparent for up to a year.