November 9, 2013 Comments

Melcor is updated and rated (lower) Strong Buy at $19.71. Basically it looks like a bargain but there is risk because profits would decline a lot if house building activity in Alberta was to take a sudden plunge. It’s also thinly traded, therefore be cautious in placing orders. I would place an order to buy at a certain price rather than to buy at the market price since the market price can be volatile due to the thin trading. This is my largest holding and I am thinking of adding to my position.

Liquor Stores N.A is updated and rated Speculative (lower) Buy at $15.06. This was a disappointing stock pick for 2013. It is down 19% this year. It started the year at $18.56 and had a dividend yield of 5.8%.

Many investors seem to think that a dividend is a very important consideration in choosing stocks to invest in. I have never considered a dividend to be the main factor in investing. A dividend is usually a plus, but it is neither necessary nor a sufficient condition for a stock to be a good investment.

By some measures Liquor Stores N.A. is attractive at its current price. The dividend is attractive but may not hold, it could be cut. The opportunity to buy at 110% of book value is attractive. Book value consists mostly of purchased goodwill. Still, we are able to effectively purchase liquor stores here for only 10% more than the company has invested in those stores and that does seem attractive. But recent results are weak and it is going to take a bit of turn-around in order for the stock price to rise.

At this time, due to lower earnings and a negative trend in earnings I consider the stock to be somewhat more speculative.

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