March 7, 2017

On Tuesday, the S&P 500 was down 0.3% and Toronto was down 0.1%

Melcor has been strong lately and is now at $15.99, which is significantly higher than its 2016 lows of under $12.50. Melcor will report next week. It is likely to report quite weak sales of home building lots in Q4. And the outlook for lot sales 2017 could be very weak. (Or maybe they will express great confidence in the longer term future given the somewhat recovered oil prices) There could even be asset write-downs on its land inventory. The income from its commercial rental properties will likely not have declined much or may be up with more square footage. It may also report profits on developing new rental buildings. Possibly there will be market value losses on its commercial rental buildings if the market “cap rates” have declined. Overall, I still think that the assets and the company are worth quite  a bit more than the share price. Nevertheless there has been a very strong recent rebound and certainly the price could fall on the Q4 earnings release. This has always been a stock that has required patience. Those who would be very troubled by a price decline could consider selling or reducing their positions now. The difficulty however is that it is thinly traded. I added shares at  low prices and logically should probably reduce now. But I am going to refrain from doing so in part because it is so thinly traded. In the case of these very thinly traded shares it would not be fair for me to sell ahead of any subscribers who wish to sell.

I am now working on an update of the Canadian ETF reference article. So far the higher dividend ETFs are the ones that are updated and they still generally look at least reasonably attractive.

I was over due for an update of this ETF article. Last year I became concerned about trusting the P/E ratios show in ishares because they are not simple weighted average GAAP earnings P/E ratios. I was concerned that they were ignoring any companies with negative earnings. In fact they are using “weighted harmonic means of the P/Es of the constituent companies”. I understand that there is some mathematical theory behind this and that it puts some weight on negative P/Es but not a full weight and that there is some logic behind it. Years ago the TSX used to freely provide the P/Es for the different segments but they no longer do so. Overall, I suspect the P/E ratios of ishares are a bit lower than straight weighted average GAAP P/Es of the index but perhaps they are right that this is a better view of the P/E.s. In any case these are the only  P/E ratios available to me and so I am using these. At least they do not appear to be adjusting the earnings and using operating earnings rather than GAAP earnings. I prefer adjusted earnings for individual companies to eliminate unusual and large one-time expenses (as long as I agree with the adjustments). For indexes I tend to not like adjusted earnings since it seems logical that in a group of companies there will be some “unusual” losses or expenses every year.