January 29, 2015 Comments

On Thursday, the S&P 500 ended the day up 0.9% and Toronto was up 0.2%.

The amazing Couche-Tard was up 4.0%. Agrium was up 1.9%, and Toll Brothers was up 3.2%

Meanwhile, Canadian Western Bank fell 2.7% to $26.60 and its rate reset preferred share fell 3.4% to $24.49.

A number of the preferred shares that I follow have been falling. The RioCan rate reset preferred share on the list above fell 3.2% to $23.24 even though the RioCan REIT units have been doing well and are near a 52 week high.

I don’t know why these rate reset preferred shares have been weak even as interest rates fairly plummeted this month.

Visa reported strong results after the close and reported it will split its stock 4 for 1. It rose almost 5% in “after-hours” showing once again that it is hard to keep a good (relatively) unregulated monopoly down.

Yesterday, Element Financial issued a press release indicating it was increasing its profit outlook for 2015. This can be looked at in a couple of ways. On the one hand it can certainly be viewed as good news and could be viewed as the company being fair in letting everyone know that it’s outlook is improved. That way those in know can’t trade at the expense of those not in the know. On the hand however, I prefer companies to “show” me achieved earnings as opposed to tell me about hoped for future earnings. And the earnings they speak of are not actual GAAP earnings. Instead they speak of operating earnings and pre-tax adjusted earnings. The skeptic in me worries that this is an attempt to push up the stock price in order to issue more shares.

The Canadian dollar having fallen to the 80 cents range and below is a VERY big deal for many companies. Imagine you are in Ontario, facing Canadian costs but selling in the U.S. market. Two years ago each sale of U.S. $1.00 translated into about the same $1.00 in Canada. Now the same $1.00 U.S. translates into $1.25 Canadian. Happy days indeed. Meanwhile a Canadian importer with costs in U.S. dollars and revenues in Canadian dollars faces the opposite situation. Sad times indeed. There will be some big winners here and some big losers. We should see some impact of this in the Q4 reports and the full impact later in the Q1 reports (assuming the dollar stays low). Some of the impact will be hedged away by some companies. But hedges are expensive and tie up a lot of money or borrowing capacity and so even companies that hedge do not tend to be hedged for more than about a year.

I plan to have some updates soon for some of the companies that have reported their Q4 earnings.

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