May 13, 2018

On Friday, the S&P 500 was up 0.2% and Toronto was up 0.15%.

Canadian Tore was down 2.0% as investors worry about its announced acquisition of Helly Hanson.

CRH Medical was up 6.6% to $4.49 in Toronto and 9.2% to $3.55 in U.S. trading. It has made a strong recovery, more than doubling, since the lows of last Fall but remains well below its previous highs. This seems likely to remain a volatile stock. In the longer term it could be a good growth-by-acquisition company. But given the history of the past year, I would not want to have too large an exposure to this company. Exposures should be judged in both dollar and percentage terms.

I have updated the percentage allocations in my own portfolio. I have a very concentrated portfolio. In particular I have a very large exposure to Melcor Developments. My weighting in Melcor developed over a long period of years as I added to the position largely based on the low price to book ratio. But the price to book ratio has remained low. I certainly think the stock is under-valued in relation to its assets. But it is a cyclic company by nature and it is possible that it will stay quite cheap if the market for new homes in Alberta weakens or if the market fears it will weaken.

I attended their annual meeting on Thursday and asked some questions. I believe that management is quite competent. They are cautious and they are very much in it for the long-term.  In the past they have received almost no questions at the annual meeting. I hope that my questions about the dividend and stock buy backs and about the stock price will help to keep those matters closer to the top of their minds.