May 7, 2015

On Thursday, the S&P 500 rose 0.4% and Toronto also rose 0.4%

Bombardier rose 6.7% after announcing it would sell a portion of its Transportation (rail) business in an IPO while retaining control. The company also announced first quarter earnings that were weak but better than last year.  And it announced that a Swiss airline will be the initial customer of it’s new C-series plane to enter service in the first half of 2015 (which seems like a delay from a prior target of late 2015). The market reaction was weaker earlier in the day and I added to my position. Bombardier is speculative but at its current price seems like a reasonable speculative pick.

I notice that Bombardier’s directors received votes mostly around 99% while most of the family member directors were a bit lower at 97 to 98%. It makes me wonder just how badly a company has to do and how poor its slate of directors has to be before they a high percentage of owners will withhold their votes. I guess people don’t mind the multiple voting shares and the fact that some of the family members have been on the Board for about 40 years and have presided over a horrible track record these past 15 years.

Liquor Stores N.A. released Q1 earnings after the close. Sales were strong with same-store sales growth in Canada of 4.3% and 1.1% in the smaller U.S. operation. But they still lost money in Q1 and have continued to add to their administrative costs. I don’t know if the market will take this news as positive or not. There was also a mention of “head winds” in the core market which it is “starting to face”. This could offset the positive same-store sales results. The conference call is scheduled for 10 am mountain or noon eastern time on Friday.

The five year Canada bond interest rate has risen noticeably in recent days to 1.13% from lows under 0.75%. This has led to a partial recovery in rate reset pref share prices and the recovery will continue if the interest rate continues to rise.

Boston Pizza royalties was up 2.1% to $21.68 and may continue to rise somewhat. It has fallen when the company issued new shares to buy a bigger slice of the franchise fee royalties. The May distribution will rise 6.2% and barring a stronger rise in interest rates I suspect these units will get back to the $23.00 level. Based on the new higher distribution it is currently yielding 6.0%, which is attractive in this very low interest rate environment especially considering that the distribution should continue to rise (albeit very slowly) over the years.

Agrium was up 2.3% today.