February 29, 2016

On Monday, the S&P 500 ended the day down 0.8% while Toronto gained 0.5% as oil rose to $33.75.

Constellation Software was up 1.9% to $565. We last rated this a Speculative (lower) Buy on December 15 at $580. Basically, a great company but it looked somewhat expensive. The stock fell fairly steadily after about December 29th and it bottomed out below $450 on February 8th. It now appears that those who bought at lower prices such as under $500 made a wise choice. And so much for those who put in a “stop loss” order as it now appeared that they instead got a “stop profit” order or at least a “lock in a loss” order. I thought about buying when it was under $500 but did not. In part this was due to lack of cash. But also I think it was because I have owned it twice in the past and sold too early at far lower prices than this and while logically that is irrelevant at this point, in practice it makes it harder for me to buy it now.

Berkshire was up 1.7% after its Q4 earnings release.

Boston Pizza was up 1.8% to $18.48. These units got as low as $15.02 in January. That was despite its high cash dividend and the relatively stable and predictable nature of this entity based on it being a “top line” type of entity (in that it just takes a large portion of the franchise fees and is not directly exposed to the operating costs of the restaurants) and based on the restaurants themselves having a long history of relative stability of revenues and relative lack of closures. Again, so much for those who used stop-loss orders. Admittedly this entity is still down substantially from its 52 week high of $23.49. So some who used stop losses may still be  happy with that move but selling investments just because they decline in price seems unlikely to work out well in the long term.

Valeant Pharmaceuticals is no longer on our list but it was down 14% today to $94 (U.S. $66) on news or rumors of an SEC investigation. At the risk of repeating this too often, I take some satisfaction from the fact that we rated this a Sell last July at U.S. $234 and indicated concerns about the trust factor of management and about its aggressive view of adjusted earnings. This company may be on a path to proving once again the old adage about there never being only one cockroach in the kitchen. When Valiant first came under fire last Fall it was amazing to see how Business News Network was quick to blame the short-seller and call into question his the motives. The short-seller appears to have been well vindicated. It is amazing that no one ever seems to mind if an analyst with a positive report is “long” a stock but heaven help the analyst with a deeply negative view who is “short” the stock.