June 22, 2017

On Thursday, the S&P 500 was about unchanged while Toronto was up 0.5%

Canadian Western Bank was up 5.9% to $27.00 as all the smaller lenders went up after it was announced that Warren Buffett / Berkshire Hathaway would invest in Home Capital. Berkshire would provide a standby line of credit of $2 billion and would invest $400 million for about 40% of the company pending approvals. The line of credit, if used, would be at 9%. But the intention is that it will not be used but instead Berkshire will collect 1.75% just for promising to have the $2 billion ready to lend (at 9%) should it be needed. It won’t likely be needed since Buffett’s investment will put a golden seal of confidence upon Home Capital and deposits should now flow in.

If I was looking to put money into a higher interest savings account or a GIC I would now have the confidence to put it with Home Capital. Looking on TD Direct I can access some Home Capital GICs but not the ones with the best rates and not the high interest savings accounts. If I wanted to put money with Home Capital in their high interest savings account or in their higher rate GICs through their Oaken Financial division, I would have to do it outside of TD Direct. I have never owned a GIC and am not interested and also I like keeping everything with TD Direct so I can see it all in one place.

Regarding Canadian Western Bank this 5.9% gain to $27.00 is nice but is not that exciting since I certainly thought it was a good investment at $32 and even higher back before oil tanked. I do see it as still under-valued. I rarely have “target prices” in mind but I fully expect Canadian Western to be over $40 within a couple years. This should occur as its book value increases with retained earnings and its trading multiple to book value rises from the current low level.

Stantec was up 1.5%

Costco was down 2.1% to $159.79. Although still not at all cheap, it might be worth nibbling on. It is a fantastic company. One idea would be to out in a limit order for $155 or $150 and see if it happens to go that low. But save some cash in case it happens to go even lower.