September 13, 2014 Comments

Canadian Tire is updated and rated (lower) Buy at $115.51. We rated this company a Buy at the start of this year at $99.49 and it is up 16% this year. At the start of 2013 we had rated it (lower) strong Buy at $69.38 and it rose 43%. At the start of 2012 we had it rated (higher) Buy at $65.90 and it rose 5%. Back on August 11, 2011 we updated it as a Strong Buy at $52.40 with a price to book value of 1.04 and a P/E of 10.5. Soon after that it became my largest position. Since then it has more than doubled. In April 2013 it represented 22% of my equities. I sold gradually on the way up but it was still recently 6.4% of my portfolio and 8.0% of my equities.

But that is history. At this time it is still a great company but it appears to be about fully valued. On Friday I noticed it hitting $116 and I sold 30% of my position. These were shares that I had bought at $101.50 in late June after I had earlier sold most of my shares at around $110.

I may be tempted to buy back these recently sold shares if it happens to fall back to even $112. In any case it now represents about 6% of my equities and that is held in a taxable account and I will likely hang onto to that for the long term.

I don’t see any reason that Canadian Tire will not continue to do well in terms of earnings. It is also selling off 20% of its credit card operation to Scotia Bank and that could also provide another boost to the share price although that is, in theory, already priced in.

Obviously, the shares could also decline with the general market if the economy softens. Overall it remains a reasonable investment but is certainly not at the bargain basement price it was in August of 2011.