March 5, 2018

Monday’s markets improved through the day and the S&P 500 closed up 1.1% and Toronto rose 1.0%.

CRH Medical released Q4 results after the close. The revenue gains seemed quite positive and the outlook for revenue for 2018 seemed somewhat optimistic despite the government-mandated price reductions that they face in 2018. The entire focus of the press release was on EBITDA which I find disturbing. Possible, the reason for this is the analysts who follow the company are most interested in EBITDA. We will see how the market reacts. Any material increase in the stock price might be limited because a lot of people have been burned by this stock and might be eager to sell.

The CEO at CN Rail has been ousted in what was clearly an unfriendly parting. It is impressive to see a Board act so independently and decisively. But I think it was quite unnecessary (and a low class move) to basically insult the outgoing CEO by stating ““The Board believes the company needs a leader who will energize the team, realize CN’s corporate vision and take the company forward with the speed and determination CN is known for,” said Board Chairman Robert Pace.”  Warren Buffett has said that the main job of a Board of directors by far is to select the proper CEO. In this case the Board, in 2016, selected their relatively long-serving CFO (who had no operating experience) for the CEO role. Naturally, the press release did not allude to the Board having made a mistake in that selection. I would not be a buyer of CN Rail stock on this news.

Bombardier is issuing $500 million U.S. in shares. I applaud the move. Their balance sheet is extraordinarily weak and it behooves them to raise equity. This should be good for the bond credit rating and the preferred shares although the credit rating would remain very weak.