June 14, 2015

Friday’s action saw the S&P 500 down 0.7% and Toronto down 0.6%.

Almost all the stocks on my list were down but Melcor managed a 2.2% gain albeit on practically no volume.

I notice TransAlta (which I have not had on the list in the last dozen years due to a conflict of interest with the job from which I recently took early retirement) is down under $10 per share. To put that in context, the earliest price shown on Yahoo Finance is $13.75 over 20 years ago on January 12, 1995. I have long had a very (very) low opinion of the company. Its managers and directors over the last 20 years or more would appear to belong in some kind of Business Hall of Shame. I normally try to avoid negative comments on companies not on my list but I feel compelled to make an exception here. It may in fact be good value at its current low price but it seems clear it has been very poorly managed. The dividends were reasonably good over the years but I don’t think that makes up for the share price. That this record occurred by a utility headquartered in Alberta which has boomed for much of the past 20 years is stunning. If current management should see my comment and be offended I would only invite them to demonstrate good returns over the next few years. The past record is what it is.

Investors in TransAlta (owners) are partly to blame. All the directors were recently voted in with at least 95% voting in favor and most getting 99%. Of course many owners don’t bother to vote but those who did gave a ringing endorsement.

Last month, TransAlta announced it sold $1.8 billion of assets to a related subsidiary company, TransAlta Renewables which trades separately and which has a decent track record,  and of which TransAlta now owns 76% of. I was looking to see what the gain or loss on the sale was but it’s not mentioned. Perhaps that is because in effect TranAlta sold these assets mostly to itself. Brilliant? With consolidated reporting there may not be a gain or loss reported. It may be beneficial if the subsidiary trades at a higher valuation multiple.

I am working now on an update for Dollarama whose managers would belong in a  Business Hall of Fame.