November 2, 2017

On Thursday, the S&P 500 was about unchanged (though the DOW was up 0.35%) and Toronto was down 0.1%.

Alimentation Couche-Tard jumped 3.1%. There was no news so this may have been due to an analyst recommendation.

Toll Brothers fell 6.1% to $43.79 after the House republicans proposed income tax changes that included limiting mortgage interest rate deductibility to a maximum of a $500,000 loan down for the current one million. The decline is probably an over reaction since the package of tax changes is far from finalized let alone approved. And it may not have a huge impact in any case. In any case the decline only gives back about 3 weeks of gains.  This decline is a useful reminder that stocks don’t only go up and ANY stock could be hit with news causing a similar or larger drop at any time. That’s why at least some diversification is always called for. In my own case perhaps I should have trimmed a bit more Toll Brothers as it kept rising in recent days. Sometimes we all fail to do what is prudent out of concern that we might miss out on more gains.

CRH Medical was down 7.3% to $2.79 in Toronto after releasing earnings yesterday afternoon. I get the sense the analysts that cover it are a bit bitter about the company surprising them with certain bad news earlier this year.  If so, the company is going to have to fight its way back with earnings. (That is, it won’t get help from optimistic analyst projections.) The company did generate cash in Q3 and posted bottom line GAAP earnings of 3 cents per share (down from 4 cents the prior year). Or maybe the analysts are simply projecting lower profits in 2018 when certain government-mandated fee cuts kick in. Meanwhile it has strong balance sheet and has been continuing to make small acquisitions. I will be working on an update for this company tomorrow.

Bombardier posted Q3 earnings (well, losses, really). The stock rose 6.1% on the news that it had a letter of intent for some 61 C Series jets. I was curious to see if they would write-down any of the C Series development costs having recently agreed to sell half of same for zero dollars. There was no write down and I could not see any discussion of that. I listened to the analyst question part of today’s conference call and no analyst asked about the potential for a write-down on C Series investment. I would think that will have to be addressed in the audited statements at the end of the year. Well maybe it does not matter much, the book value per share is already negative and so maybe further negative is not a concern to analysts.

Perhaps I am giving up completely on the company too early but the company has had to sell off chunks of itself in desperation and is faced with selling the C Series at cash losses. I remain confident that the company will continue to exist. But it may end up at some point being owned by the debt investors.

Costco was up 1.4% to $164.95 after reporting same-store sales growth of 5.9% (adjusted for gasoline price changes). That is impressive growth. Costco always seems expensive in relation to earnings but it is a power house. Accumulating on dips has been a good strategy. The strong same-store sales also perhaps suggests strength in the U.S. economy.