May 10, 2015

Friday was a good day to own stocks. Actually, on average, most days are good days to own stocks. When you own stocks you own a slice of the corporate world. Most large corporations are profitable. The gyrating prices of stocks often makes them seem risky to own but over the longer term they tend to provide more than satisfactory returns to owners.

On Friday, the S&P 500 was up 1.3% and Toronto was up 0.5%.

Notable gainers from our list included Visa up 4.3% on news that it may buy its former subsidiary Visa Europe. In the past few years VISA has generally looked expensive. But it has also looked like a (largely) unregulated-as-to-price monopoly. A wonderful toll booth business. It is up 377% since I added it to this site rated Buy on April 15, 2009 near the bottom of the financial crisis stock crash. It is also up 250% since I rated it a (lower) Strong Buy on May 6, 2011. I sold my own shares far too early and at times it was not on our list at all but I don’t think it was ever rated it lower than a hold on this site. I rated it a Weak Buy to start 2015 and it is up 6.0% this year.

Liquor Stores N.A. was up 3.4% after releasing strong same-store sales in Q1. I have been negative on the company due to the low level of annual earnings and the intense competition.  I did visit their flagship Wine and Beyond Store in south Edmonton recently. It is certainly a spectacular store with a far better and more relaxed shopping experience than is typical. The question is whether people will pay for that type of shopping experience when it comes to liquor. Liquor Stores N.A. wants to move the shopping experience upscale while a number of competitors including Costco offer lower prices and lower cost operations.

Bombardier was up another 3.5% as the market digests its plan to sell a minority portion of its train division into an IPO creating a second public company as a controlled subsidiary. This is clearly a speculative stock.

Wells Fargo up 2.3% and Berkshire Hathaway up 2.1%.

Boston Pizza Royalties Income Fund is updated and rated (higher) Buy at $21.75. I am becoming increasingly enamored of this entity as an investment. It has a cash yield of 6.0% and that yield can reasonably be expected to rise slowly over time. This royalty fund is basically a share of ownership in the franchise fees paid on food (but not liquor) at Boston Pizza restaurants. This franchise fee gets paid off the top. As investors we are not at risk for the profitability of the restaurants unless profits fall to the point where the restaurants simply can’t make the franchise fee and begin to close. There is that risk. But Boston Pizza has been doing well for years and there is no sign of that changing. The unit price is certainly at risk of falling if interest rates rise. And interest rates will likely rise somewhat. But the chance that interest rates will rise substantially seems to be fading. And the distribution would not change with interest rates.

As I leave the world of paid employment and start to think more about sources of fixed income this entity with what appears to be a safe yield of 6% and where the yield can reasonable be expected to rise slowly over the years certainly seems like a good choice.

It is not risk-free but I like the risk-return tradeoff here. It’s currently 5.9% of my portfolio. I will consider raising that when I have the cash available and particularly if I can get it around the $22 level or less.