March 6, 2014 Comments

On Thursday the S&P 500 was up 0.2% and Toronto was down 0.2%.

Our stocks picks has a reasonable good day. American Express was up 1.5% to $93.52.

The Canadian Tire voting shares, inexplicably, were up another 3.3% to $140.00. Meanwhile the non-voting shares were down 0.3% to $99.20. Only 656 voting shares traded versus 164,423 non-voting shares. With only 656 shares traded this latest rise in the voting shares cannot be taken too seriously.

Costco declined 2.8% after posting disappointing revenues and profits that “missed expectations” (which probably means the expectations were wrong). I’d love to see Costco fall further since I would like to buy but it seems too expensive. It is a powerful company (due its low cost operation) and will do well long term.

Liquor Stores N.A. released earnings after the close. The Q4 report had some bad news in terms of a write-off of intangibles or goodwill in British Columbia due to the fact that grocery stores are going to be allowed to open liquor store sections in their stores. Also sales growth was weak. They also indicated that profits will not rise until 2016 and that until then operating margins will be reduced as they implement certain plans. But overall the market was probably already expecting this and so it’s not clear to me that the stock will decline tomorrow. The company indicates it is committed to maintaining the dividend which is close to a 9% yield. If that is believed then the price could rise. The best scenario here would be if the company could borrow money at a low interest rate and buy back shares that yield 9% and thus increase EPS that way. This may not be possible. The worse case would be a share issue. I would have thought that a dividend cut would be preferable to a share issuance.

Brave investors could also borrow money and invest in the shares yielding near 9%. But that could certainly be risky.

British Columbia released news on its liquor-in-the grocery store plan just today. It’s my understanding that grocery store may need to purchase a license from an existing store and so this could be an opportunity for salvation or partnership for Liquor Stores N.A.

Overall these shares remain speculative due to all of these matters.

The Conference call is tomorrow, Friday at noon Mountain time, 2 pm eastern and perhaps the share price will be quite volatile tomorrow morning and then may or may not be volatile during and after the conference call.

Canadian Western Bank released another excellent quarterly earnings report.

Berkshire was up 1.9% to $121.20.

The bottom of the market in the great recession occurred on March 9, 2009, five years ago. Those who either rode out the bad times or kept up their regular investing all this time have done very well.

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