October 21, 2015

On Wednesday, the S&P 500 was down 0.6% and Toronto was down a full percentage point.

Valeant Pharmaceuticals, which was added to this site rated Sell on July 30 at $331 is down to $154.  I had concerns about both the valuation and the trustworthiness of management, so I am not interested in buying even at this much lower price.

Many of the preferred shares on our list have risen noticeably of late after having fallen to levels that certainly seemed too low. The Canadian Western Bank Preferred Share rose 8.4% today to $19.52. It was about two weeks ago that I reported buying some of these at $16.80.  The Enbridge Preferred share that is on our list was up 5.2%.

The Five Year Canadian government bond yield was 0.88% as of yesterday. Ponder that. At that rate you could double your money (before taxes and inflation) in 114 years with simple interest. But to be fair, counting compound interest it would only take 79 years. Why would anyone lock up their money for five years to earn 0.88% per year? Perhaps banks and life insurance companies required to do so by regulators? Or pension funds that blindly must allocate a certain percentage of their money to five year government bonds no matter what the yield? Or someone that just has such huge piles of money that they don’t need for at least five years and are unwilling to take any risk whatsoever.

I continue to be somewhat flabbergasted to see Melcor continue to decline. It was around $14.15 this morning and I entered an order to buy yet a few more shares at  $14.10 and I got a partial fill on that order. Under accounting rules, Melcor marks to market the value of its revenue properties each quarter. We could certainly see a loss in that area this quarter and probably a higher vacancy rate as well. But I don’t expect anything too negative. It seems to me that if Melcor is really only worth half of its book value then surely a lot of developers of the new condos and office towers and industrial and retail buildings around Edmonton will be in bad shape. And yet the new building continues apace. Despite lower oil prices and a certainly a slower economy I am not seeing the evidence that would come close to justify Melcor being so low. New home building has certainly slowed, but it has not disappeared. But we shall see, in investing there are no guarantees. It will be another three weeks or so before Melcor reports earnings.

After becoming interested in the trucking business I have decided to add TransForce to our list and my analysis is in progress. So far I quite like the story and the valuation. It will almost certainly be rated Buy or (higher) Buy. It will report Q3 earnings tomorrow after the close. I don’t have any insight into the earnings for this quarter but I suspect they will be reasonably good. If I had cash I would be tempted to buy some tomorrow. However, it might be safer to wait for the earnings report.