November 5, 2015

Thursday’s action saw the S&P 500 down 0.1% and Toronto down 0.8%.

Valeant was down about 15% after big investor Bill Ackman sent a letter expressing frustration to the company. Last week he tried to explain why the company was still solid in a 4 hour presentation – which caused the market to decline. The company may be thinking it has enough enemies without having a friend like Ackman.

I took a look at my July analysis of the company to see if the share price was now getting down close to book value. Not even close, as I have the book value at U.S. $18.69 as of Q2. So, it seems the company still looks very expensive compared to what it paid for its assets. Based on the company’s view of adjusted earnings it would look quite cheap. I would not be prepared to put any significant amount of money, if any at all, into these shares at this time.

Rate reset preferred shares have continued to recover in recent days and weeks. Most recently due to a rise in the government five year bond yield. The Canadian Western Bank preferred share is now at $20.47 up 3.9% today. I had mentioned these on September 30 and for a  couple days after that when they could have been bought for under $17.00.

Melcor fell 3.0% today. The Melcor REIT will report on Monday and it could very well report lower occupancy and possible some loss in market value of its buildings. Melcor Developments owns about 56% of the REIT which represented 13% of Melcor’s profits in 2014.

Melcor itself will report earnings after the close on Tuesday. No-doubt Melcor’s lot sales and profits will be lower than in the year ago quarter. But I suspect they are still selling lots and that the situation is far from dire. They are financially strong and are very well capable of surviving even steep declines in their sales and have done so many times over their long history.

Stantec reported decent earnings this morning Profits per share were up 4% despite the slower economy and the company continues to grow. The stock rose only 0.6% and may rise more tomorrow after analysts have had more time to digest the earnings and provide their assessments.

AutoCanada reported earnings after the close that were down as would be expected but still well into the positive territory. Apparently the earnings were a shade lower than expected.

I have removed Fortis Inc. from the list due to a possible conflict of interest as I am doing a few hours per week of contract work that involves an analysis of the earnings of one of their subsidiaries. They report earnings tomorrow and I had indicated in early October in the daily comments that I expect those earnings to be strong due to their recent U.S. acquisitions.

I will be updating a number of companies in the next couple of weeks for Q3 earnings and also I hope to add Royal Bank before too long but first I need to take a lot of time to carefully read their extensive annual report.