Canadian Tire reported strong results this morning and was up 4.2% to $70.23. This is my second largest holding. It has done reasonably well. I feel very comfortable that the earnings and particularly the assets support the share price with a reasonable margin of safety. “The market” appears to fear it will get clobbered by Target. We shall see, Target for one thing has bought into high-cost leases but may still price aggressively. I am not sure there is all that much overlap with Cnadian Tire but clearly Target will pick up business from many retailers and does increase the competitive landscape somewhat. Still, I think Canadian Tire remains a a good investment. If you do a search for Canadian Tire on this page you can see I have been quite bullish on it. Especially last August when it was briefly under $53 (remember the debt ceiling fisaco that sank stocks in August?)
Melcor reported after the close today and had good although not spectacular earnings. But Melcor trades just under book values and appears to be a good investment. With the continued strong economy in Alberta it should do well. In the ling run it will be cyclic however and profits can be hit hard in recessions. Also its rental building values will drop if interest rates rise and this will flow to earnings as a loss. But I would certainly rather hold Melcor trading at just under book value than RioCan trading at 1.5 times book value (Both have their rental buildings fully marked to market, and RioCan profits (but not cash flows) would be hit hard if interest rates rose). I have been consistently positive on Melcor for some time.
I plan to updates the reports for Canadian Tire and Melcor within a few days. Also likely Walmart.
After the close today it was announced that JP Morgan had experienced some kind of unexpected trading loss of $2 billion. To me it’s another example of why I have never believed much in the whole concept of risk management. Many risk management procedures may in fact add to risk because they make people think they can measure the unknowable. They make people too reliant on black box systems and formulas.
All big American banks may get hit on this news on Friday. But Wells Fargo does not engage in much if any of the proprietary trading activities and hedging that led to this loss. It could be an opportunity to add to Bank of America.