February 26, 2015

On Thursday, the S&P 500 was down 0.1% and Toronto was up 0.1%

Canadian Tire rose 8.8% to a new record high on a very strong earnings report. This company has been very well managed and has been firing on all cylinders for at least several years. The biggest concern is the impact of the sharply lower dollar. On the conference call, the company acknowledged that this will be a drag on earnings and indicated that whatever hedging they have in place can only delay the impact but not eliminate it. If the dollar stays low, their prices have to rise or profits fall. They alluded to their buyers being smart and offsetting this in some way, but I doubt there is anything that can be done. I will plan to update this company in the next few days. I suspect it will stay rated (lower) Buy. If I owned  it in a tax-free environment I would reduce my position (take profits). I own some in a taxable account and may just hold on.

Constellation Software was up 6.3% despite an earnings report that on the headline number looked somewhat weak. I will have to look into the reason, possible it was based on the outlook.

Element Financial was up 3.3% on what were likely good earnings on an adjusted basis.

Bank of America was down 2.7% after it announced that two directors will not stand for reelection and that its chief accounting officer will leave basically immediately. That is a possible red flag. The two directors were said to be busier in other outside roles of late. But people don’t often simply leave the Boards of giant banks just because they are busy. And a chief accounting officer leaving suddenly, is always a worry. It appears that this news came out after hours so the stock reaction may not be over.