March 15, 2017

So, on rate-hike Wednesday, the FED did raise as expected. But apparently it spoke of two more increases this year rather than the feared three. Interest rate increases are like gravity to stock prices but the market viewed today’s announcement as a forecast of less of an increase in gravity than feared over 2017, so they rose.

The S&P 500 was up 0.8%, Toronto was up 0.9%.

CRH Medical was up another 5.4% to $11.33 in Toronto and $8.55 in the U.S. This increase came after it announced another acquisition today. ¬†Until I update the report for this one I have no opinion on whether it is still good value. This company was added here on October 9 at $5.72 Canadian or $4.32 U.S. In this case I would consider our report to be well out of date because of the huge price movement. I would not mind if similar “problems” occurred more frequently to make our reports go out of date. I bought only a small position and have not considered selling.

Couche-Tard got as low as $57.36 today and so my order from 10 weeks ago at $58.10 finally got filled. The stock closed at $59.07.

The Canadian dollar rose almost one cent U.S. today. This was unexpected and goes to show that markets can always do the unexpected.

The five year Canada bond yield fell noticeably today and the U.S. five and ten year bond yields also fell. Presumably this was due to the FED signalling probably two more hikes this year rather than the feared three. Again, this illustrates how markets can often do unpredictable and even sometimes counter-intuitive things.

On the subject of predictions: For the most part the stock ratings on this site have very little to do with predicting short term market movements but rather simply try to identify stocks that seem undervalued. I keep score by looking at price movements on the stock ratings each calendar year. If a stock truly is undervalued then barring a change in circumstances it should be a good investment. It may take longer than a year but measuring performance over a calendar year seems reasonable. Markets are ultimately unpredictable but if you buy more when it seems to be offering up bargains and reduce when it seems overpriced (applies to individual stocks and the overall market) then things will likely work out well.

Melcor’s 2016 earnings came out. The press release does not discuss Q4 separately but it appears that Q4 was surprisingly strong in term of building lot sales. There were no asset writedowns of any significance. The book value at close to $30 remains almost double the share price. We will see how the market reacts but I was quite pleasantly surprised by the Q4 results. This stock is so very thinly traded that it may take time for the share price to fully react to the earnings release. They also announced that their CEO is leaving. This is apparently on good terms as he is staying on for another month and then another two as an adviser. One of the V.P.s is the new CEO. It also appears that the executive chairman and the executive co-chair will no longer be executives. In most companies the Board chair and certainly the vice-chair are not executives unless the Chairman is also CEO. I view this change positively as I had been a bit bothered by the fact of paying executive salaries to Board members which seems to duplicate the role of the CEO. This is a surprising move though and I don’t know if anything can be read into it.