November 22, 2015

Friday’s markets saw the S&P 500 rise 0.4% while Toronto fell 0.3%.

West Texas Intermediate oil is down to $39.39 which is negative for the Toronto stock index.

Liquor Stores N.A. rose 3.4% which probably indicates that some analyst or other was impressed with their announced small expansion into New England.

Valeant recovered another 8.3%.

The Bombardier series C preferred shares rose 8.5% to $10.58. This is logical given that having arranged for two large cash investments, it seems unlikely that the company will fail to pay the distributions on these shares at least for the next several years.

The Bombardier common equity B shares failed to rise upon the announcement of the $1.5 billion investment by the Caisse. At this time the equity market value of Bombardier is $2.8 billion. On that basis, the Caisse paying $1.5 billion for 30% of the Transportation segment would suggest that the whole company is worth considerably more than $2.8 billion. I understand that some analysts are disappointed that the Caisse investment has onerous terms for Bombardier and dilutes the eventual upside for common share owners. But onerous terms were to be expected. Bombardier remains highly leveraged and produces products upon which it struggles to make any profit. I had expected the common shares to rise somewhat as this latest investment lessens any risk of bankruptcy at least for the next several years.

Melcor fell 4.5% to $14.90. There can be no doubt that Alberta is in recession. These shares offer the opportunity to buy into assets at a bargain price. But owning these shares will likely require patience.