June 10, 2015

On Wednesday, the S&P 500 was up 1.2% and Toronto was up 0.5%.

Most of the stocks on our list were up. Some notable gainers were Dollarama up 2.7% after releasing an earnings report. Visa up 2.5%. Canadian Western Bank up 2.0%.

Oil was up but then slipped back in evening trading and is presently at $61.10 for the July West Texas Intermediate futures contract in New York.

As always, there is a lot of noise and volatility (in both directions) in the market. Meanwhile corporate profits tend to grow relatively steadily. For example earnings for the S&P 500 are up 75% since 2004 and 171% since 1998. With companies in the stock exchange increasing their earnings relatively steadily over the years it should not be that hard to go along for the ride and make money in stocks. Worrying excessively about the next threat to stocks and losing sight of the big picture is why so many people fail to make much money on their investments.

I look at Melcor trading at 5.6 times trailing earnings. Now that included some unusual gains to be sure. But I calculate Melcor as trading at 6.9 times adjusted trailing earnings. Also it’s trading at about 68% of book value. And yet buyers are not rushing in to bid this stock up due to fears about the Alberta house building outlook due to lower oil prices. Even Melcor itself does not want to buy its own shares. It announced a share buyback 10 weeks ago and then promptly bought exactly no shares since then. There are always risks, but this looks like excellent value to me.