March 28, 2017

On Tuesday, the S&P 500 was up 0.7% and Toronto was up 0.6%. Most of the stocks on our list rose today.

Home Capital was the big topic of conversations in business news for Canada today. The stock fell 9.6%. If I owned it, I know it would be difficult to pull the trigger and sell. But it is probably the prudent course of action in this case. ¬†Due to their highly leveraged nature, lenders always have some chance of getting into really serious trouble. If home prices remain high and if the regulators are not too harsh then Home Capital will likely recover at some point. But if regulators are too harsh OR we see a very significant house price decline then the company could be in really serious trouble. If I were selling (I don’t own it) I would not be selling because the price might go down temporarily. I would be selling because the price might go down relatively permanently.