2020

The first few comments for 2021 will appear here until I get a new page setup for 2021.

January 3, 2021

Our report on TFI International (a large Canadian trucking company with now substantial operations in the U.S) is updated and rated (lower) Buy at $65.53. It also began trading in 2020 on the New York Stock Exchange where it last closed at $51.58. I particularly like the long-time CEO of this company. Alain Bedard handles the conference calls entirely on his own and knows the company inside and out including operations and finances. He is extremely candid and also extremely capable. He is more focused on creating shareholder value than just about any CEO I have come across. That does not necessarily mean that this is the best investment around or that the stock won’t decline temporarily.  But the track record suggests it will continue to rise over the years. It’s one of my larger positions. while I am somewhat tempted to reduce my position somewhat given the recent price gains, I think overall I am best just letting this one ride.

December 31, 2020

AND, that’s a wrap. Stock trading is over until next year (Monday).

On this final day, the S&P 500 was up 0.64% while Toronto mirrored that with a 0.64% loss.

One of the bigger movers today was AutoCanada 6.2% to $23.61. If it can keep up the performance it had in Q3 it should continue to do well. It is beating the industry but the industry overall is still a bit weak.

Melcor slipped 3.8% giving back some its gains it made earlier this week. A subscriber alerted me to a very positive report on Melcor from “Seeking Alpha”. That was likely what pushed the price higher for two days this week. 

On Wednesday. the S&P 500 was up 0.1% while Toronto was virtually unchanged.

Melcor Developments was up 14.5% to $9.79. It’s nice to see it showing some life. But even with the volume higher than normal today, it is a thinly traded stock. Only 27,100 shares were traded. I’d like to think that someone decided that buying these shares for under 30% of book value was simply good value. But it’s too early to tell if this is anything other than a little blip.  The Melcor REIT was up 2.3%.

AutoCanada was up 5.6% recovering some of its recent slide.

CRH Medical was up 4.9%.

Tomorrow should be a light trading day in the markets. Not only is it the day before a long weekend, but any shares traded today or tomorrow don’t settle until after the weekend and so it is too late for any sort of “window dressing” trading or tax loss selling. Nevertheless there is always some news for the market to react to or someone putting extra buying or selling pressure on a given stock.

On Tuesday, the S&P 500 was down 0.2% and Toronto was down 0.5%.

Stantec was up 2.2%.

Melcor showed a bit of life rising 4.4% and with the Melcor REIT rising 3.6%. 

On Monday, Toronto markets were closed. But the S&P 500 rose 0.7%. 

Apple was a notable winner, rising 3.6%. And Amazon was up 3.5%. Starbucks was also strong, rising 2.3%.

The usual pattern would be that Toronto will play catch-up tomorrow. But then again with the pace of news in 2020, the usual may not apply.

Our report on American Express is updated and rated (lower) Buy at $117.35. Its revenues and particularly its earnings are down due to the pandemic such that it looks somewhat expensive in relation to earnings. But if we assume that it will recover and grow after the pandemic then it is reasonably valued. It is a high quality company that should be a decent long-term hold. But VISA may be a better choice. I’d be interested in adding to my very small America Express position if the price were to drop back under $100 which however may not be too likely…

American Express makes most of its revenue and earnings from the discount fees it charges merchants. But becasue it must finance customer’s purchases for about 30 days in many cases and much longer in for those that run balances, it has a balance sheet that looks very much like a bank. In fact it is a bank holding company. But I would not consider this to be much like a standard bank.

On Monday, the U.S. markets will be fully open while Toronto will be closed. 

Trump has signed the COVID relief bill which should be positive for markets.

I am working on an update for American Express. It should be a decent long term hold. I expect it to recover from the pandemic and regains former earnings and then grow from that. Meanwhile if will have probably two more weak quarters Q4 and then Q1. It looks like a reasonable investment at its current price although it could pull back before ultimately recovering.

On Christmas Eve, markets were mostly positive as the S&P 500 rose 0.35% and Toronto rose 0.2%.

There were no big movements in the stocks on our list. But Shopify was up 1.7% and Visa Inc. was up 1.7%.

 New York markets and probably most world markets will be open on Monday but Toronto will not trade in lieu of the Boxing Day holiday.

The last trading date for 2020 for Canadian and US publicly traded stocks will be Tuesday December 29th in order to record the gain or loss in the 2020 taxation year.

Our report on Royal Bank of Canada or RBC trading under symbol RY is updated and rated (higher) Buy.  This is Canada’s largest bank and it continues to grow in size year after year. It is has five major divisions all of which are consistently profitable. Royal like all banks  by nature is highly leveraged which could make it risky. But it relies on sophisticated risk management practices that have meant that that its earnings rarely falter much. It also benefits from the fact that large banks are so integral to the economy that the government itself  comes to the assistance of banks when there is any sign of trouble by providing favorable policies and regulations. Royal will likely continue to be  a good long term holding for both dividends and growth.

An otherwise good day in the markets on Wednesday was rather spoiled by bad news from one of the stocks I own and that is on our list.

The S&P 500 was up 0.1% and Toronto was up 0.2%.

Canadian Western Bank was up 1.9%.

CRH Medical was down 21% to $2.81 on Toronto after announcing that a contract involving 20% of its operating earnings will not be renewed when it expires at the end of October 31, 2021. It is possible that the contract could still be renewed but for now the expectations is that it will not be. It’s quite a negative development because previously the expectation had been that all such contracts would be renewed periodically. This is a risk I had looked into back in 2017 but had not concluded it was a serious risk.   It’s not yet clear if this is something that will happen with additional contracts. I am holding onto my shares but this is definitely a nasty development. And it comes on top of a year when their business is down due to the pandemic. Checking insider trading the company itself has been buying back shares fairly steadily since April but the last purchase indicated was on November 10 at $3.17.  This would indicate that the non-renewal of the contract is taking management by some surprise. It is disturbing to see that the CFO exercised options and sold 25,000 shares just last week on December 18 at about $3.70. And he had not previously sold any shares all year. He did not necessarily know the major customer would announce the non-renewal of the contract but it would seem he should have some explaining to do in regards to insider trading rules. But, he still holds 368,000 shares and so it is not the case that he was selling a large portion of his holdings.

With apologies to Trump supporters (and he does have some good policies) I will say that the recent avalanche of pardons that include associates of Trump (and potential or even actual past witnesses against Trump) are the very definition of corruption. If there is such a thing as legalized corruption in the U.S. this may be it. That country has an enormous amount of respect for the “framers” of its constitution. But it seems clear some updates are needed and include Federal oversight of the federal election. And probably a big change in how many offices are held on a partisan basis and also the notion of party affiliation being a matter of public record. On the other hand I will say that I agree totally with Trump that $600 one-time COVID relief payments are insufficient and I agree he is right to ridicule many of the things in the Bill that is bringing COVID relief payments. Well, it seems the last four weeks of the Trump presidency are going to continue to be, shall I say, unusual.

CRH Medical is down about 25% this morning after announcing that one of its major contracts representing 20% of its EBITDA is set to not renew as expected at the end of 2021. This is an ugly development. CRH operates in various clinic and relies on contracts to do so that are renewable periodically. I had asked the company questions about certain risks around renewal and I thought I had been assured there was nothing to worry about. 

The company does hope to continue negotiations for a potential renewal of the contract.

Unfortunately CRH is a small niche business which makes it more susceptible to this and other risks.

At this point I will continue to hold as I don’t want to sell into what could be an over reaction to the news.

CRH paid significant amounts in numerous transactions to acquire the contracts to provide service in numerous clinics. It’s possible that this non-renewal has revealed a risk which could affect many of their other contracts. 

This stock now has to be considered to be very risky.

Markets were “mixed” on Tuesday with the S&P 500 down 0.2% and Toronto up 0.3%.

Shopify surged 7.3% to a new record high close. Apple was up 2.85% and Constellation Software was up 4.6%. A great day for these digital economy stocks. 

RIWI was down 4.55% but it is a small and speculative company and so volatility comes with the territory.

AutoCanada was down 4.8% to $24.10 perhaps due to the various shutdowns. Motor vehicle sales are still allowed in Ontario, but by appointment only. 

President Trump has posted what seems to be a smart video where he complains about the tiny $600 per person COVID rescue bill and  ridicules all the nonsense that is in that 5000 page bill. Apparently it is an “omnibus” spending bill. Whatever it is, Trump is probably right to ridicule it and ask for more money for Americans who need it.

Markets were mostly down on Monday although the Dow Jones ended the day up 0.4%. The S&P 500 was down 0.4% and Toronto was down 0.2%.

Canadian Tire was down 3.3%, RioCan was down 2.5% – both of these probably related to the Ontario lockdowns. Linamar was down 3.4%.

Constellation Software was up 3.0% and Shopify was up 2.4%.

I am taking a close look at Royal Bank. I think it’s clear that this is a Buy but I want to study it a bit more. It’s amazing how fast it continues to grow year after year and to post strong returns on equity. Earnings were down in 2020 due to provisions for loans losses but that’s likely to be just a minor speed bump.

The $900 billion stimulus Bill will apparently be passed shortly. Apparently it is 5000 pages  and the people voting have not been able to read much of it before voting. There is something seriously wrong when this bill is 5000 pages. I believe it has been subjected to what is called “Christmas treeing” – each senator and congress person gets to adorn it with their favorite ornament or bobble in return for their vote. Since this Bill is smaller than hoped for the market is unlikely to get excited by it at all.

Some things that the market is probably starting to worry about include:

Trump’s antics around delegitimizing, or in his dreams over-turning, Biden’s Presidency. It’s getting harder to ignore.

The virus of course.

The Russian cyber attack – when you think about how dependent we all are on the internet, a large scale cyber attack is truly frightening.

On Friday, the S&P 500 was down 0.35% and Toronto was down 0.7%.

AutoCanada slipped 4.8%. Possibly it just ran up too fast, so not a surprise.

FedEx was down 5.7% despite supposedly beating estimates and have a very strong quarter. I will likely update this one before year end. Royal Bank is my next update.

Canadian Tire was strong with a 2.4% gain.

Wow, Donald Trump has convinced an awful lot of people that the election was “stolen” by Biden. He has said it so many times and so loudly that it is hard for those who support him NOT to believe it. And if he himself did not really believe it, I think he is starting to.  I had thought that his claims after the election would spook the markets. But not so far. And I have to hand it to his supporters very few of whom have taken to the streets. Supporters have shown restraint. But now Trump seems to be ratcheting up the volume and basically calling for street protests on January 6th when the House of Representatives is scheduled to officially accept the result of the Electoral College. Maybe this will now start to spook the markets. 

Countering that is the possibility of a stimulus package which could be passed in the next day or so which would be good for the markets (not to mention for an awful lot of Americans who need help).

My “links” page is a collection of links that I found useful over the years. some of those links I use a lot and some I had not looked at in years. I just went through and made sure all the links worked and deleted some that no longer worked. I added some notes. As I went through I was reminded of some very useful sites that should be of interest to investors. I also added a link for a mortgage amortizations calculator and one to an auto lease calculator.

By-the-way, I have been asked many times to link to various sites such as FOREX training and various day-trading type sites.  Often this is on a reciprocal basis where they would link to my site and it can be a good way to get traffic and to increase my google search rankings. I turn ALL of those down. I refuse to link to anything that I am not familiar with and/or I would not use myself. In recent years I often get asked to post “guest” articles with links imbedded in them. It might be overly cautious of me, but I never agree to any of them.

Some investors really like dividend reinvestment plans. They allow your dividends to be used to purchase more shares and with no broker fee. And sometimes you even get a discount of around 2% or even 5%!

I can definitely see the attraction when there is a discount. But I was never attracted to the idea if there was no discount. I’d rather let my dividends accumulate and then I choose where to reinvest them. And with $10 or less fees to trade, the opportunity to avoid a $10 fee but giving up the ability to pick and choose where I reinvest is not attractive to me. 

Also, most of my investing has been in RRSP accounts along with some in RESP and TFSA. And as far as I know, you can’t register your shares in your own name and join DRIP programs and, importantly, get any discounts when your shares are in those registered RRSP, RESP and TFSA plans. In those accounts, yes you CAN sign up with your broker for what appears to be a DRIP and they will buy shares for you with your dividends and with no fee. But I am almost certain that these “synthetic” DRIPs do not include the ability to get the discounts that actual DRIPs sometimes offer. It is only the DRIPs with discounts that I would ever be interested in.

And even in taxable accounts, it seems to me that there may be some disadvantages of registering your shares with the company. Possibly that makes it more complicated to sell the shares later?

If any subscriber has a lot of experience and knowledge about DRIPs and wants to share information, I would be happy to post your guest article here about it. Or if someone wants to suggest some good web sites about DRIPs I will add that to the links page here.

On Thursday, the S&P 500 was up 0.6% and Toronto was up 0.5%

The Boston Pizza units were up 6.7% to $10.82 after it announced the 20 cent special  distribution. The 20 cents really just results from the six months of zero distributions as cash built up even with the reduced operations. Hopefully the 20 cents also signals that they think they can at least sustain 6.5 cent monthly distribution. If only a few of their locations end up closing permanently then perhaps these units can continue to do well. Overall, I am surprised how well the units have recovered.

lululemon was up 6.6%. 

I notice today that Bank of America is redeeming a 6.2% preferred share. This would be a perpetual preferred share. This could be because with todays low interest rates they could reissue at a lower rate. Or it may be that as bank capital rules change these particular preferred shares were no longer what they need on the balance sheet. Its too bad those 6.2% shares were redeemable. They would be a good investment in a very lower interest rate environment. If not redeemable they would likely be worth perhaps several dollars more than $25. 

BitCoin has been in the news reaching record highs. It’s not the sort of thing I can analyse.  Apparently many are investing in BitCoin and see a bright future for it as a way to protect against possible inflation due to central bank money printing. That may be valid but it is at odds with the fact that a 30 year U.S. government bond pays under 2% (1.7%). Presumably the investors buying these bonds are expecting quite low inflation. It may be that pension funds, insurance companies and certain other investors buy long-term government bonds with virtually no regard to the interest rate. They may be effectively required to buy them due to regulations and due to accepted notions of proper diversification.  In any case buying BitCoin to protect against big inflation is at odds with the bond investors accepting such a low rate. We can check back in 30 years and see who was right.  I also heard one BitCoin fund manager describe BitCoin as a “hard asset”. Perhaps I am slow to understand. BitCoin has a scarcity value but I am pretty sure it is the complete opposite of a hard asset. 

Another thing I will put on the record about BitCoin is that while it scarce (there will only ever be 21 million created) it seems to me that if it became more generally used as money then a bank could be set up to lend BitCoin and take BitCoin deposits on a fractional reserve basis. It seems to me that this could create a lot more BitCoin, just the way that commercial banks create money by lending. And such a BitCoin bank might be able to pay and charge interest in either dollars or in a percentage BitCoin itself. (You borrow 10 BitCoin and pay back 11 sort of thing).  I have thought this is possible for a long time but not sure I ever mentioned it on this site. I have never heard the possibility of lending creating more BitCoin (and diminishing the scarcity value) . But a google search reveals there is some borrowing and lending going on. But I am not sure if the lending of BitCoin that is already occurring amounts to fractional reserve type banking or not.

Markets were mostly up moderately on Wednesday as the S&P 500 rose 0.2% and Toronto rose 0.35%.

Shopify surged another 8.3%. And Amazon was up 2.4%.

But many of the stocks on our list were down somewhat.

AutoCanada was down 5.7%. This morning Desrosiers reported that automotive shipments in Q3 were quite weak.  It was not at all clear to me how that related to AutoCanada’s prospects. But presumably the various  shutdowns and restrictions on retail operations are having a negative impact. AutoCanada has had an extremely strong recovery from its lows and so this decline is perhaps not surprising. 

Boston Pizza Royalties has just announced a special 20 cent per unit distribution payable January 29. Their regular distribution is 6.5 cents. They had indicated about two months ago that  there would likely be a special distribution in December. This is a one-time thing and is being done because they need to distribute all profits in order to remain non-taxable as an entity. They has suspended distributions for about six months and this is where the cash is coming from. This is absolutely a one-time thing. I thought they might not do it given the shutdowns must be once again taking a toll on their royalty income coming in.

An announcement about the redemption of a rate reset preferred share from Enbridge caught my eye.

A subsidiary of Enbridge  (Westcoast Energy) will redeem its 5.25% minimum rate reset shares.  These shares have generally traded at moderately higher than $25. That’s because the 5.25% minimum reset makes them much safer and more attractive than most rate reset preferred shares many of which trade well under $25 because interest rates fell and they will reset at low rates. I’d like to think that Enbridge / Westcoast is redeeming these because they consider 5.25% to be too high. If the required market yield on rate resets is falling due to lower interest rates then that is supportive of the price for all rate resets.  But there may be other reasons that Westcoast no longer wants or needs these preferred shares on their balance sheet. Westcoast can likely  issue debt at significantly lower rates than 5.25%. Also Westcoast has a higher retained earnings level now than it did at the start of 2020. If the credit rating of the Westcoast debt has increased then these preferred shares may not be “needed”. Preferred shares add equity that can improve the credit rating on debt issuances.

In any case minimum rate, rate reset preferred shares can be attractive. I mentioned on December 3 below that Brookfield Infrastructure has a 5.5% minimum rate reset limited partnership unit (BIP.PR.A) that is trading not much over 25. I don’t like the tax complexity of this one and would buy it in a non taxable account.

Air Canada managed to sell its desired $850 million worth or 35 million shares in the over night marketed deal. As I expected the price came in at the lower end being $24.

Also as would be expected this has knocked the share price down in the market. Currently it is down 10% to $23.67.

I took a look at the supposedly strong balance sheet. They do have cash and short-term investments of  $7.8 billion. That’s up from $5.9 billion at the start of the year. That sounds good. But all of that increased cash came from new borrowings plus a share issuance that raised $552 million in June.  And that cash is offset by many liabilities. As of Q3 book value of common equity amounted to just  17% of its debt level. 

The equity market cap (before the new shares just issued) is $7.0 billion which is relatively strong (or at least not terrible) in relation to its $10 billion in debt.

Overall, I would not call this a strong balance sheet.

Air Canada needs the pandemic to end and it is relying on the federal wage subsidy and hoping for additional assistance to try to get through unit it ends. 

Unfortunately for Air Canada much or most of its wage subsidy will have been paid out to workers who are not able to productively work and bring in revenue due to the lack of passenger demand. 

I would consider Air Canada shares to be highly speculative. I am not interested in buying any. The company is dependent on further government assistance and may have to give up some equity ownership in return for that assistance.

The government will insure that Air Canada continues as a business and will try to look after the employees and retirees. But there can be no assurance that the share price will rise or will not head far lower.

Our report for Linamar is updated and rated (lower) Buy at $68.65. Its results in 2020 are not indicative of normal because of the pandemic. But even with the pandemic it has done okay. There was a loss in Q2 despite the federal wage subsidy but they were profitable in Q3. They got a large federal wage subsidy in Q3 but would have been profitable (although down from Q3 2019) even without the wage subsidy. Linamar is likely to continue to be cyclic and volatile. But it looks like a good investment for the long term.  It is very well managed and has been a great Canadian success story.

Air Canada is out with a share offering attempting to raise $850 million in “an overnight marketed deal”.

I’m certainly not surprised that they need money. I saw the CEO claim recently that their balance sheet is very strong. I am not going to attempt to analyze their balance sheet on the fly here but I will say I am skeptical of that claim.

I find it strange that they have not set a price to sell the shares at. TD is helping to market these shares and their offering states that

The shares closed today at $26.34. 

I find it strange that investors are expected to agree to buy at an unknown price. At $24.75 the price would be 6% below today’s close. But if I was not interested in buying Air Canada today at $26.34, why should I suddenly be very much interested at a price 6% below that?  Well, the brokers may be able to convince people to buy and may have some institutional investors lined up. But my guess would be that the price will land at $24 or lower and that is if they are able to successfully market these at all.

The reason there is no fixed price for the shares is because this is not a “bought deal”. Normally the brokers would basically guarantee that they can sell the shares at a given price. In this case the brokers understandably do not want to take the risk. Or perhaps they would have offered a “bought deal” only at a lower price.

I guess best wishes to Air Canada in seeing if this deal will fly.

Markets rose on Tuesday apparently due to hopes that a stimulus / COVID relief package would be passed soon in the U.S.

The S&P 500 was up 1.3% and Toronto was up 0.7%.

Apple was up 5.0%. Alcanna was up 4.3%.

TFI increased its quarterly dividend by 11.5% from 26 cents to 29 cents which reflects its  strong earnings performance.

CMHC today released housing start figures for November and year to date. November saw big gains versus November of last year with total housing starts up 22% and single-detached up 18%. Year to date total Canadians housing starts are up 1% and single detached are up 5%.

I am always interested in the Alberta figures given my investment in Melcor. Alberta total starts in November were down 1% and single-detached were down 2%. Year to date total starts were down 10% and single detached were down 7%. Edmonton is doing a somewhat better than the provincial average. Overall, things could be worse but clearly Alberta is not seeing the boom in housing starts that much of the country is seeing.

On Monday, the S&P 500 finished the day down 0.4% while Toronto declined 0.9%.

Constellation Software was up 2.85%.

RioCan was up 2.5% and has help up surprisingly well after its distribution cut and in the face of the challenges to the physical retail world.

I added to my fairly modest position in RIWI today at $2.62. This is a small company and I consider it to be somewhat speculative.

Recently I also bought some of Alcanna’s 4.7% convertible debenture that I commented about on back on November 15. I had put in an order a little below market and it got filled. I am not exactly excited about the 4.7% yield but I thought it prudent to have more fixed income.

There is nothing more central to economic activity than banks. Our pay cheques are deposited to bank accounts. The great majority of our spending and bill paying consists of the money in our bank accounts being transferred to the bank accounts of various retailers, service providers,  utility companies, municipal tax offices, mortgage lenders, land lords, and others. And all those retailers and service providers and others are constantly transferring money from their bank accounts to various suppliers and staff. Physical money is rapidly becoming obsolete. So, almost all economic activity involves banks.

It therefore seems wise to have some understanding of how banks work.

To that end, I have updated my article on how banks make money in their deposit and lending operations. I also added real-life figures for Canadian Western Bank.

Our report on Canadian Western Bank is updated rated Speculative Buy at $29.00 (it closed today at $29.09)

There are many pluses and minuses to consider about buying shares in CWB at this time:

The biggest minus is that it is already expecting a continued increase in loan losses and probably write-offs in the next year and things could be worse than expected. The bank has been careful to offer payment deferrals to businesses affected by lockdowns rather than attempting to enforce loan payments which could push some into insolvency. And the federal government has done a lot to support businesses and the provinces have done things as well. Everyone wants businesses to get through the lockdowns. CWB has a strong history of weathering recessions without bad loans getting too high. Still, the COVID situation is unique and it is possible that the ultimate bad loans will be worse than expected.

Another minus is that CWB has never earned the high returns on equity that the biggest Canadian banks have. Accordingly, it trades at a cheaper multiple to earnings and book value. If that will be the case for many years into the future then it might be better to own the bigger more profitable banks even though they trade at higher “multiples”.

Another minus is they are projecting no earnings growth this next year (due to bad loans)  even though loans and deposits will grow.

On the plus side… CWB is trading at just 91% of book value and in the past has been well over 200% at times. If the multiple goes back up we get a double just from that.

And CWB will almost certainly grow over time. As it grows, profits will ultimately grow as will the share price eventually.

Banking is generally a good business. Here you have a chance to buy a bank for 91 cents on the dollar of its book value. To borrow a concept from Warren Buffett: If you started your own bank it would cost you a dollar on the dollar (and then take years to get up to speed).

Overall, CWB will not likely turn out to be a really fantastic investment but it will probably be a reasonably good investment.

A reasonable strategy might be to hold or buy a sort of half position and be prepared to add to that if the price happens to go back below about $25 due to the loan loss situation next year.

On Friday, the S&P 500 was down 0.1% and Toronto was down 0.25%

About the biggest gainer on the list I monitor was WSP Global up another 2.0%.

lululemon was notable to the downside with a loss of 6.7% despite a strong earnings report. But it has had stupendous gains for months and so this is really a minor correction.

On Wednesday, the S&P 500 was down 0.8% and Toronto was down 0.45%.

Shopify was down 6.0%.

Toll Brothers was down another 2.9% to $43.99. I read through the conference call transcript today and and most of the call discussed all the ways Toll has been having very strong sales of its homes and sees this continuing. This has been a volatile stock but appears set to do well over time.

The Boston Pizza units were down 4.6% probably due to the various lock down initiatives. RioCan was down 2.75% probably for the same reason.

The Melcor REIT was down 6.1% to $4.80 after its Board basically deflected the suggestions of Firm Capital. Given the lockdowns in Alberta this could easily drift lower before recovering sometime in 2021.

Dollarama was up 3.0% after releasing its latest earnings.

Linamar was up 4.8%.

On Tuesday, the S&P 500 and Toronto were each up 0.3%.

Toll Brothers was down 7.9% to $45.32 despite its strong earnings report. It remains one of my larger positions. If that were not the case I would be very tempted to buy more shares at this price given the strong earnings report. I also want to hold onto my cash in case markets decline.

AutoCanada was down 7.8% today. It has had an extremely strong recovery in recent months and so this pull-back is not too surprising. It now seems well positioned for future earnings growth but volatility can be expected. 

The Melcor REIT issued a press release after the close basically indicating that it was not going to do anything in response to Firm Capital’s suggestion that Melcor Developments take it private. I had said I did not particularly expect anything to come out of this. It seems logical for the REIT to hunker down now and get through this pandemic. The unit price may decline on this news.

Alberta just announced quite a hard lock down for the next four weeks. Alcanna may do well on this news. Most of its business consists of liquor stores in Alberta and those are going to get even busier. The stock has done well lately (albeit after years of poor performance). At around $6.00 it seems attractive although somewhat speculative given its past.  Boston Pizza,  will see lower sales and so the Boston Pizza units could decline.

Monday’s session saw the S&P 500 down 0.2% and Toronto up 0.35%.

Shopify was up 2.9%.

Canadian Western Bank was down 3.5% after analysts suggested its non-interest (mostly staff) expenses were too high. It has added staff to position itself for growth. It is good value as it trades under book value. Its move to a mre advanced risk management system was intended to allow it to leverage its equity more. But partly or largely due tot he pandemic the transition tot he new method will be delayed (yet again).  CWB’s ROE may continue to be lower than its historic level for at least another year.

Toll Brothers was up 2.7%. Then, after the close it reported basically a blow-out and record quarter. Earnings were similar to last year and modestly higher on a per share basis. But its contracts to build houses rose a stunning 68%! Headlines indicate that it beat expectations. Yet the stock is apparently down 3.5% in after-hours trading. 

Markets pushed higher once again on Friday as the S&P 500 rose 0.9% and Toronto was up 0.7%.

Intact Financial was up 3.7%. 

Canada’s energy exchange traded fund XEG was up 5.6%

WSP Global was up another 5.6% as the market digested the news of its latest announced huge acquisition.

Stantec was up 3.9% as it announced a small acquisition.

Canadian Western Bank was down 2.45% even though its earnings announced Friday morning were apparently in line with expectations. 

RioCan ended the day down only 2.1% after announcing it will cut its distribution by one third. That was a surprisingly tame reaction. Perhaps the market anticipated it. Also, the returns from RioCan will ultimately be determined by its operating success.  Whatever level of risk the market perceived about RioCan’s future cash flows from operations was perhaps not much changed by this announcement. And, after all, the cash retained by RioCan and not dividended out is still owned by the unit holders collectively.

The Canadian dollar was noticeably higher this week and has mostly trended up since April. It’s now at 78.25 U.S. cents. At the wholesale rate it will cost Canadians $1.28 to buy a U.S. dollar. So a cheaper U.S. dollar just when we basically can’t travel. It’s never clear where the Canadian dollar will head next. Perhaps it will go higher. But if I had an upcoming need for U.S. currency I’d be inclined to convert at least some Canadian cash now rather than hoping for a better deal later.  As investors, we should probably have a certain allocation to U.S. companies and kee p that allocation fairly steady and not try to predict currency movements.

On Thursday, the S&P 500 finished the day down 0.1% while Toronto was up 0.2%.

Toll Brothers had a strong day, rising 4.3%. 

WSP Global jumped 11.6% after announcing it will acquire the large environmental consulting firm Golder Associates. Golder has 7000 employees in 155 offices across 30 countries.  In most cases the stock price falls when a company makes an acquisition. Clearly the analysts like this deal. It was apparently done at a good price. And WSP is issuing only a relatively modest amount of shares (in a private placement) and funding most of the purchase with debt. WSP has certainly been an impressive growth-by-acquisition company. 

I notice most of the rate reset preferred shares on our list were up today and in general have been up lately. 

After the close, RioCan announced it will cut its distribution by one third. Given the recent price increase of RioCan this news presumably was not anticipated by the market. The various shut-downs in Ontario were likely a trigger for this move.  RioCan indicates it will reevaluate the distribution over time. with a view to increasing it from this “new base” (which probably means it will not be returning to the old base anytime soon). It will be interesting to see how far the units fall on this news.

Yesterday there was a Brookfield rate reset preferred share that reset at 5.5%. It would have reset at about 5% but it has a 5.5% minimum. This is BIP.PR.B and closed today at $25.24. Actually these are preferred limited partnership units rather than shares. I believe they are quite a bit more complex in terms of taxes and so I would rather buy these in a non-taxable account to avoid the tax complexity. The 5.5% minimum and with these trading near the $25 par seems attractive  and could be considered for part of  the fixed income allocation of a portfolio.  But note that unlike bonds these will not necessarily ever be redeemed at par. And they can certainly trade lower than $25 in certain circumstanced. This security held its value very well over the first 5 years of its existence – except during the panic of this past March and it took several months to recover from that. They were issued 5 years ago.

On Wednesday, markets edged upwards once again. The S&P 500 was up 0.2% and Toronto was up 0.35%.

Linamar was up another 2.5%.

AutoCanada bounced up 3.6%

Couche-Tard was up 2.5%

RIWI was down 8.4% to $2.61. It’s speculative but worth considering at this price.

I spoke to the investor relations person at Melcor today. I learned nothing negative and a few positive things. The home building industry (and therefore the sale of Melcor’s building lots has held up better than expected and certainly better than feared. I continue to view the Melcor shares as substantially under valued. 

Canadian Western Bank will release results on Friday morning. While there can be surprises, I suspect the earnings will be reasonably good. One risk here is that they have some large loans where a bad debt situation can be relatively material. But overall, I expect their bad debt to remain manageable.

Markets rose on Tuesday with the S&P 500 up 1.1% and Toronto up 0.6%.

Linamar jumped 5.2% which may have been due to analyst recommendations to buy.  After the close, DesRosiers reported that light vehicle sales in Canada in November were down 10% versus last November. This came after two months where sales had returned to about the same level as the prior year. It is amazing how fast DesRosiers is able to collect and publish these figures. 

The Melcor REIT was up 4.2%.

Aurora Cannabis was down 17.2%.

Bank year-end earnings season has kicked off and it looks like banks continue to do well. 

Markets gave back a little ground on Monday as the S&P 500 was down 0.5% and Toronto was down 1.2% 

Shopify had another strong day gaining 4.1%.

RioCan was down 3.5%. That is not surprising after the recent gains and given the partial lock-downs across Canada. It will likely continue to be volatile until the virus situation is resolved and until it becomes more clear what the longer term impact of changed behaviors (more online shopping in particular) will have on its future. It’s also not yet clear how much bad debt (bad rent) it will suffer from the pandemic., This depends in part on the extent to which governments rescue businesses. So far, RioCan was still collecting over 90% of its rents.

Aurora Cannabis was up 11% and then after the close announced some layoffs and that it will cease operations in Medicine Hat. This company has made profound mistakes in over-building in the past few years. 

Bombardier rose another 3.5 cents or 7.1% for reasons that I am not aware of. (Although they did announce a new CFO today.) 

Both Bombardier and Aurora had fallen so far from their highs that now a small rise of really a few pennies becomes a large percentage move . (Aurora was up $1.51 but based on the price before the recent one share for 12 REVERSE split that amounts to less than 13 cents per original (pre one for 12 consolidation)  share.

On Friday, the S&P 500 was up 0.2% and Toronto was up 0.3%.

There were no particularly note worthy movements in the stocks on our list.

As of Sunday evening, indications are that he markets will open modestly down on Monday morning.

We have had a lot of gains lately. Those with too heavy an allocation to equities might want to consider raising some cash. Cash provides stability and can be used to add to positions if the market does pull back. Ever since the market turned around so sharply last Spring holding more cash has not been beneficial. But there will always come a time when it is beneficial. 

Our Tiny R&D penny stock company Ceapro is out with Q3 earnings this morning. At a QUICK look:

U.S. markets were closed on Thursday for the Thanksgiving Holiday. Toronto was up 0.2%.

Alcanna continues to rise and was up 2.45% today.

The Boston Pizza units were up 4%. This may have been driven by Ontario’s decision to cap the fees that the likes of Skip the Dishes charges them.

Bombardier and its preferred share BBD.PR.C were each up over 4%. 

CRH Medical jumped 8.6% despite not issuing any news.

I note that September Retail Trade in Canada was up 4.6% versus September of last year. That seems rather amazing given the higher unemployment. Presumably this is due in large part to the various government programs designed to keep money flowing to unemployed people during the pandemic. It could also be due to some changes in consumption patterns. People can’t spend on travel so employed people had more money to spend in retail stores. People are also spending less in restaurants which frees up cash for other spending including liquor store sales. These government assistance programs appear to be vastly more generous than what is happening in the U.S.

After the close, the Melcor REIT put out a press release indicating it had met to consider FIRM Capitals’s proposal that Melcor Developments take the REIT private. They indicated they will consider the matter further at their upcoming regularly scheduled meeting and said they are open to value-enhancing suggestions.

The REIT has about 13 million units that trade publicly. At $5.00 per unit that has a value of $65 million. At the $8.70 price suggested by FIRM, it would cost Melcor Developments $113 million to buy out the public unit holders. With assets of 2,029 million, Melcor Developments could probably do that if it wanted to. Possibly they would consider that the experiment (or experience) in having the REIT trade separately has not worked out all that well. But Melcor Developments is a conservative company. They might hesitate to take on the added debt  and to spend cash to do this. And they might consider $8.70 to be too generous at this time.

Another option would be for Melcor Developments to sell off most or all of its share on the REIT.  But that probably only makes sense if they can get a good price. They could continue to manage the REIT without owning much of it. But they would probably have to allow the REIT the right to find a new manager if it wanted to. 

It’s interesting to see that there has been no indication that the Melcor Developments Board has met to consider FIRM Capitals suggestion. 

The REIT’s Board appears to have a reasonable degree of independence from the Melton family. But the REIT certainly can’t force the parent Melcor Developments to do anything. And if anything had to go to a vote then Melcor Developments and the Melton family can defeat any REIT Board proposal that they don’t agree with.

Overall while these sorts of outsider agitator actions often do result in action, they also often fizzle to nothing. At $5.00 the REIT is good value and it might be worth buying some on speculation that something could happen to boost the share price and that in any event it’s probably a decent investment even if nothing happens.

On Wednesday, the S&P 500 was down 0.2% but Toronto was up 0.2% as the price of oil continues to rise.

West Texas Oil, WTI is now just over U.S. $46. That’s about $60 Canadian which is actually not a low oil price except in relation to some of the peak years for oil prices. If Canadian producers are not making a profit now then maybe they should think about whether their usual complaint to government applies to them also” “You don’t have a revenue problem, you have a spending (expense) problem”. Granted, most of Canada’s oil is heavy oil and the benchmark there is lower at U.S. $34.62 or about $45 Canadian. Again, I don’t think this is really such a low price if you look at the last 30 years. 

Gainers today included Shopify – up 4.25% and Amazon – up 2.1%, presumably because online shopping is set to continue apace with the continued pandemic.

I bought some Couche-Tard shares today. I thought they would go up after their strong earnings report. But the market may be very skeptical that the high gasoline margins can continue. In any case it has been a great company to buy and hold. 

The Bombardier pref share that I still keep an eye on (BBD.PR.C) was up 10.7% to $9.74. It’s risky but it pays $1.5625 per year to yield 16%. It is a perpetual preferred, not a rate reset. But note that the Bombardier common equity shares are trading at just 41 cents. The common equity market value of Bombardier is $1.1 billion and the Enterprise value (ads debt) is $12.7 billion.  I think that what this means is that the market considers that the debt investors in effect own most of Bombardier by far and that there is a risk that the common equity will become worthless. If that were to happen then I don’t see why the preferred shares would be worth anything either. If Bombardier ever goes bust it seems more than possible that the debt investors would get less than a $1.00 on the $1.00 and that the common and preferred investors would get nothing.

I believe I have said before that over the past 20 years parties that have done well from Bombardier would include debt investors, executives. employees (except the many that lost their jobs) and the pref investors. As long as it does not actually go bankrupt it keeps making its high interest and pref share distributions. Common equity investors have seen huge losses over the last 20 years (like 98% or so).

It can be argued that the governments would never let Bombardier go broke. But is that true? The governments might well try to protect the jobs but I doubt they would try to protect investors. 

The bottom line is that the debt and the preferred shares of Bombardier look juicy and have been juicy in terms of yield but especially for the pref shares heading to zero is a possibility. If Bombardier does start to look stronger than yes, these pref shares could rise in addition to continuing to pay the dividend. But I just point out that they should be considered risky.

On its books Bombardier shows a negative value for the common equity (due to massive accumulated losses). If the company were liquidated at book value, the debt holders would get a good bit less than $1.00 on the $1.00 and the common and preferred equity would get nothing. In a liquidation, debt holders have to get fully paid before anything goes to pref or common equity, at least that is the theory.

This post was sent by email on November 24th:

Anyone trying to log into investorsfriend.com in the past couple of days will have seen a security warning and not been able to get in. My apologies for that. I need a new SSL security certificate and it is being worked on. In theory, it will be fixed by Wednesday morning.

Meanwhile here are my market comments as of Tuesday evening.

Optimism about the vaccines and the Biden transition proceeding have over-shadowed lots of bad news on the virus front.

The DOW is at a record high. The S&P 500 was up 1.6% today and Toronto was up 1.0% adding to recent gains.

Oil prices have risen significantly in the past few days.

Most stocks have risen in the past few days.

Canadian Western Bank is up to $31.25. 

Melcor is finally showing some life. The Melcor REIT has risen from the recent $4 range to close at $4.98 today. Still well below where we would hope but a welcome rise. This came after FIRM Capital who own a lot of units put out a press release urging Melcor Developments to take the REIT private at $8.70 per unit. This is probably quite unrealistic but possibly it will spark Melcor to do something. But Melcor has a history of just doing its own thing and they may not do anything. The Melcor REIT will ultimately recover when the pandemic subsides and the Alberta economy improves. It could recover earlier if Melcor increases the distribution or does take some action to boost the unit price, but we really can’t count on that. Alberta has just announced a 3 week partial lockdown and so that is not good news for collecting commercial rents.

Melcor Developments also rose on the news and on higher oil prices to the $8 level from a recent $6 level. This is a welcome gain but it still trades way down at about 25% of book value. These shares will also recover when the pandemic subsides and I am confident that Melcor has the balance sheet to ride out the remainder of this storm. But unless oil keeps rising or there is some corporate action to boost the share price there may not be much reason for the shares to keep rising until the pandemic does end.

Meanwhile Couche-Tard was out with earnings after the close and it appears to be another blow-out quarter. Gasoline profit margins were exceptionally high. They are raising the dividend.

Markets ended moderately higher on Thursday after starting the day in negative territory. The S&P 500 was up 0.4% and Toronto was up 0.1%.

Futures markets on Thursday evening are suggesting that the market will be moderately weaker on Friday. Apparently, hopes for a stimulus package are fading. But much can happen in a day. We have the antics of the Whitehouse and the the toll of the pandemic but also the potential for a vaccine to be approved as early as tomorrow. There is seldom a completely dull day in the markets it seems. 

I trimmed my AutoCanada position a little but will hold onto the great majority of what I have. No-doubt the stock will continue to be somewhat volatile but it does seem that the newer management has really turned a corner in recent months.

Markets were down somewhat on Wednesday as the S&P 500 was down 1.2% and Toronto ws down 0.3%.

The Boston Pizza Royalties units were up 8.4% to $9.76 and yielding 8.0%. The gain surprises me given the current virus situation but it may be that the market is looking past that to normal times returning. What we don’t know is how many locations will close and not reopen. Possibly it will be very few but that remains uncertain. BP will apparently make some specials distribution in December. But that will merely be to make up for about six months with no distribution. What matters is whether the current 6.5 cents per month distribution can be maintained and can it grow?

AutoCanada was down 2.0%. Looking at its Q3 results it has really vastly improved. It probably has a good future now. But given the past problems the market may be over reacting to the upside. Those with large positions might be prudent to trim some at this price.

U.S. Markets were slightly negative on Tuesday as the S&P 500 fell 0.5% but Toronto managed a 0.3% gain.

There were no many stocks on our list rising or falling more than 2% or so. The Melcor REIT was up 5.4% to $4.77. It had spend most of the last six months under $4.00. 

I am still looking at AutoCanada’s third quarter report. It did benefit somewhat from the government wage subsidy. But most of its good results were due to the Canadian recovery in auto sales and to its own good management and drive for profits. 

Markets were strong on Monday on the news that a proposed vaccine has achieved a 94.5% success rate so far in a Phase III clinical trial.  And this one does not require ultra cold storage in distribution. While it would be some months before the vaccine is widely available, the market is looking past the next few months to better times ahead.

Almost all the stocks on our list were up. Of particular note:

AutoCanada was up another 11.2% to $29.03. This is a remarkable turnaround. I will look closer at its report and have further comments tomorrow.

Canadian Western Bank was up 4.1%.

Boston Pizza Royalty units were up 5.8% to $8.88. I thought these units might slip back due to a new round of partial lockdowns. But, especially given the vaccine news, perhaps markets are looking past that to better days in the Spring.

Costco announced a $10 special dividend after the close. No-doubt the stock is expensive in relation to earning but it has been a real powerhouse throughout the pandemic.  Apparently Berkshire Hathaway has sold its position in Costco. I suspect this was not Buffett’s trade but rather one of his two portfolio managers. Buffett has praised Costco many years ago in the annual letter and his aged partner Charlie Munger has been on the Costco Board for many years. As far as I know, Buffett never bought Costco. He may have stayed away to avoid any perception that he would get inside information from Munger.

Near the closer of Markets,  Biden made a speech in which he promised higher taxes on the rich and on some corporations and promised a $15 federal minimum wage. I think that would be negative for stock prices but nevertheless it sounds like good policy to me. There truly has to be a more equitable division of wealth in the U.S.

On Friday, the S&P 500 was up 1.4% and Toronto was up 0.6%.

AutoCanada was up 10.6% after releasing earnings. This has been a story of good management since the new management took over a couple of years ago. Part of the story is that auto sales have recovered well in general. But this company has outperformed other auto dealers on average. I think they may also have been quite masterful at accessing government assistance with the wage subsidy. I know they were in Q2 but I have not yet looked at the Q3 results.

Most stocks were up on Friday including the Melcor REIT which gained 7.8% although that was on the usual relatively thin trading volume.

I added a little to my small RIWI position on Friday. 

As of Sunday eyeing, stock futures are up despite the exponential rise in the number of COVID cases and despite Trump’s refusal; to concede and despite republican street protests (which have so far been remarkably non-violent. The market may be ignoring these risks and looking forward to a stimulus package.

In updating the report on Alcanna, I noticed it has a convertible denture that pays 4.7% and is trading right around par value and maturing in 15 months. The symbol is CLIQ.DB

This might be of interest as a fixed income investment. It is also tempting to consider this as an alternative to holding cash or a guaranteed cash equivalent. But time and again, investors learn that there simply is no substitute for cash. Only cash and absolutely guaranteed cash equivalents can absolutely be relied upon not to drop in value during various market panics such as we had early this year.  In addition, convertible debentures could sink well under par value and in rare cases go to zero due to problems specific to a given company. So definitely not a substitute for cash.

But for those who have enough allocated to fixed income to allow for diversification then perhaps convertible dentures like this are worth considering as part of a fixed income allocation.  

I would consider investing in convertible debentures at par or below where the company seems reasonably strong. 

I don’t like the idea of buying them above par on the hopes that the stock price will rise above the conversion price. In that case I would rather just buy the stock.

The Alcanna one has a conversion price of $14.60 which is far higher than the $5.47 stock price. Therefore this convertible debenture should be bought for the 4.7% interest and not on any hope of conversion.

See also my comment about the Aecon convertible debenture that I posted November 1. One correction, I said in that post that I did not recall ever owning a convertible debenture. I had forgotten that the Melcor REIT debenture that I mentioned on March 25 and bought around then is a convertible. That debenture and probably many others were trading at steep discounts in March. I bought it for the probably capital gain, not the interest. They would rarely be available at such steep discounts unless the company was quite risky or in a general market panic. 

Melcor Developments is updated and rated Buy at $7.00 This has admittedly been a poor and frustrating investment for a long time. It’s now trading at just 21% of book value and is still profitable although with low profits. For those holding it, I can’t see giving up on it with the price so low in relation to its assets and book value. But there may be little reason to expect a big improvement anytime soon. They have hunkered down to survive the pandemic which they will almost surely do.

Alcanna Inc. is updated and rated Speculative Buy at $5.47. This is the formerly named Liquor Stores N.A. It came under new management over two years ago and they have taken a lot of actions to improve things. It reported good earnings on Friday after the close. This marks the second profitable quarter after  years of poor results. It is benefiting from the pandemic as liquor store sales are up with fewer people going to restaurants and bars. This appears set to continue for another quarter or two. The company also has retail Cannabis operations which could add to profits but which is also not a proven profit maker yet.

On Thursday the markets took more notice of the pandemic and the S&P 500 was down 1.0% and Toronto was down 1.1%.

Alcanna was down 4.3%. I like its chances of doing well as lockdowns lead to more home consumption of alcohol as restaurants and bars are getting more restricted in Alberta. It is going to release earnings after the close tomorrow, Friday.  That’s unusual timing but is actually best practice as it will give analysts and investors the chance to digest the results over the weekend. This is how Warren Buffett at Berkshire always does it. Their Q3 sales and profits should be up but there could always be some unusual thing pushing profits down. They should report progress on their Cannabis retail operations as well.

Most of the stocks on our list were down modestly today. 

Although it was Remembrance Day in Canada and Veteran’s Day in the U.S.; the markets were open today.

The S&P 500 was up 0.8% and Toronto was up 1.0%. 

Linamar surged 16% after releasing earnings.

Some of the “tech” stocks that had declined on Monday/Tuesday on news of progress on the vaccine front recovered somewhat with Shopify up 7.2% and Amazon up 3.4%

Melcor Developments managed a 5.6% gain to $7.00 on its earnings news. That’s not much of a gain considering how low it is and considering its book value per share is $32.83.  The trading volume remains extremely thin. There is almost no market interest in this company. Given my large position in this company, I will update the report shortly.

The Boston Pizza units were up 3.1% to $8.90. They will report Q3 on Friday morning. Given what they already reported on October 1, we already know that BP did reasonably well in Q3 considering. But now we are facing some more closures. I would be surprised to see these units get much higher in the short term  and could instead sink back. But we shall see what they say on Friday.

Andrew Peller was up 6.6% but that appears to have been in advance of releasing earnings after the close (leak?). The earnings  results appear to be good. Sales were up only 1% but earnings were up substantially.

Our report on Canadian Tire is updated and rated Buy at $165.25.   The Canadian Tire stores came though the pandemic extremely well. Even in Q@ when stores in Ontario were shut down for several weeks sales were up 20% for the quarter. Then in Q3 same-store sales were up an astonishing 25%. The sports stores and Mark’s were down substantially in Q2 due to the pandemic. But in Q3 Sport Chek was down only 1% in same-store sales and Mark’s was up 6%. The credit card operation is weaker as they have not been aggressively trying to sign up new card holders and bad debts are up somewhat although not as bad as expected. Overall, Canadian Tire is doing very well and remains a Buy.

On Tuesday, the S&P 500 was down 0.1% (but the DOW was up 0.9%) and Toronto was up 0.85%.

Toll Brothers bounced up 7.3%

Canadian Western Bank was up 3.8%.

Melcor Developments was up 6.6%. It then reported Q3 earnings after the close which were probably better than expected and included selling 196 building lots in the U.S. in more or less a bulk sale which cleared out its inventory there (it will now work to develop more lots in that same U.S. project). They sold 180 building lots in Alberta which compares to 109 in Q3 last year. However the lot prices and the gross profit margins were quite low. Overall the stock continues to look significantly under-valued.

Canada is implementing a lot more COVID lockdowns in various places. This is bound to be bad for some companies. The U.S. may also need to impose some lock downs. So far the market is ignoring that risk as well as the risks of the vengeful outgoing President.

Monday was a very strong day in the markets after pfiser reported extremely promising preliminary results from its Coronavirus vaccine phase II trial.

The S&P 500 closed up 1.2%, The Dow Jones Industrial Average soared 2.95% and Toronto was up 1.2%..

Even as the gains subsided somewhat at the end of the day there were many large gains including:

American Express – which soared 21%

The Canadian Energy sector ETF (symbol XEG) was up 16%

RioCan was up 12%

Heineken was up 11%

Going the other way were some of the stocks that had benefited most from the virus situation:

Shopify was down 14%

Amazon was down 5%

Toll Brothers was down 9%.

Looking at the markets since the election, I note that the Presidential race turned out as I feared it might with Trump ahead on election night and then Biden winning after the mail-in ballots were counted. I got that right but it so far seems I was wrong to predict that that outcome would lead to markets declining given that Trump and his followers would dispute the election.

The lesson there is that it is ALWAYS very difficult to predict markets. I am certainly glad that I did not do something radical like move largely to cash in advance of the election. A one-sided bet like that is more of a gamble than an investment strategy. Time and again the markets have shown that a fairly heavy exposure to equities wins out over time -even if it scares the crap out of us once in a while such as last March.

Given my interest in Melcor, I updated the report for the Melcor REIT for its Q3 report which came out on Thursday, after the close. It appears to be undervalued but keep in mind it is very largely concentrated in Alberta which not only has its woes but is generally out of favor with investors at this time.

On Friday, the S&P 500 was about unchanged and Toronto was down a tiny 0.1%.

Aurora Cannabis was up a huge 56% but still remains down 62% year to date. There was no news from Aurora to explain this gain. There was speculation it was due to the emerging Biden win. But if so, why did the gain not happen on Wednesday when and Thursday when the Biden win was already apparent. Another speculation was that it was due to a “short-squeeze”. Whatever, the reason it illustrates the extremely volatile nature os some stocks. Aurora is a bankruptcy risk and there fore it can teeter between having almost no value and having at least some value and that can lead to big percentage changes.

Over the weekend it became even more clear that Biden was the winner and that Trump is going to fight the results in the court and even more-so in the court of (republican) public opinion. So, far the market seems unfazed by that. Futures suggest the market will open higher on Monday morning. 

Despite some uncertainty in the election result and despite Trump’s antics, markets were strong once again on Thursday.

The S&P 500 was up 1.95% and Toronto was up 1.9%.

Notable gainers included:

Canadian Tire – up 6.65% after releasing strong Q3 earnings

Couche-Tard – up 5.5% after news of its latest acquisition (see my last post)

Dollarama – up 5.5%

Shopify – up 3.8%

CRH Medical – up 16%. This was despite no news. Hopefully it did not occur because news of positive Q3 results has leaked out. The positive results would be welcome but management has a legal obligation not to let news leak out. Or maybe it was an analyst upgrade.

Stantec was down 3.6%. Apparently the market was not satisfied with its Q3 results and/or outlook,

Tonight, Trump very much doubled down on his allegations of election fraud and further indicated that he will challenge the results in court. But the scary part is that he is really challenging the results in the court of public opinion and specifically among the nearly half of voters who did vote for him. I’d be amazed if that does not lead to at least some violence. Perhaps the market will take some notice.

After the close, the Melcor REIT released earnings. I think the results were about as would be expected. Melcor believes the units are under-valued in the market.

For most of the last four years the market has greatly cheered the Trump Presidency. In the lead up this election it cheered the hoped for a decisive Biden victory. Today as it appeared that we will instead get a squeaker of a Biden win, the market (to my surprise) cheered some more. And that was in spite of Trump staring to make good on his promise not to accept the election results. (We shall fight them in the courts, we shall fight them on television, we shall fight them on twitter, and we shall never surrender … or something like that).

It seems the market, most of the time at east, is an incurable optimist.

The more notable gainers today included:

Intact Financial – up 6.3% after releasing earnings.
Shopify – up 5.4%
Toll Brothers – up 5.3%
Constellation Software – up 4.7%
Amazon – up 6.3%

Going the other way, CN Rail was down 2.8%.

CRH Medical -down 2.6%.

RIWI Corporation was out with an interesting announcement. It is in the business of basically predicting the future based on its proprietary random sample methods and it provided evidence that it had correctly predicted for clients that Biden would win in a tight race and not the big win that others were predicting.

After the close, Couche Tard announced a small but important acquisition in Hong Hong. For many years (pre-dating the chain’s acquisition by Couche-Tard) Circle-K has licensed its name in Aisa which resulted in a lot of Circle-K branded stores there but it seems very little revenue from the licensing fees. Couche-Tard has now acquired one such licensee in Honk Kong. Couche-Tard never seems to rest and is always hungry for more growth. 

Also after the close, Costco announced another month of blow-out same store sales . Same-store sales were up an average of 16.5%. That is astounding growth. Surely people can’t still be stocking up. I don’t know if this is in groceries or more in general merchandise. Clearly Costco continues to gain market share.

Also after the close, Stantec reported modestly higher earnings. And WSP has also reported.

Markets were fearless on election day as the S&P 500 was up 1.8% and Toronto was up 1.8% and Toronto was up 1.5%.

The vast majority of stocks were up. Once again there were no notable declines among the stocks on our list with the exception that penny stock Ceapro declined 5%.

AutoCanada jumped 8.0% and is back close to its recent highs. Industry statistics out today indicated that October total auto sales in Canada were considered strong as they were only down 2% versus last year. After some very slow months in 202 (due to the pandemic) auto dealers on average are back to about normal sales levels. And AutoCanada has been outperforming the industry averages.

The market now awaits the results of the election. 

In terms of the market the most freighting outcome would be a close election where the result could change as mail-in ballots are counted over several days or more and which could lead to court challenges. If Trump is ahead tonight and then gets beat as mail-in ballots come in that would certainly seem to lead to a tumultuous time. Hopefully that will not happen.

On Monday there were images of U.S. store fronts being boarded up out of fear of rioting and associated property damage and/or looting that could occur with the U.S. election.

There is also more and more news about second-wave economic shutdowns happening in some countries.

But the market ignored those things as the S&P 500 rose 1.2% and Toronto rose 0.75%.

Among the gainers: Alcanna was up 4.7%, Canadian Western Bank 3.6%, Toll Brothers 3.45%, AutoCanada 6.9% and Ceapro (which is a volatile penny stock) 7.1%.

There was really no notable stocks to the down side of the stocks on our list.

Tomorrow and Wednesday should prove to be interesting days in the market…

Election day looms. The big question is whether markets are likely to rise as soon as the election is out of the way – in which case deploying some cash on Monday or Tuesday would be wise, or will they decline on Wednesday especially if Trump loses but indicates he does not want to accept the results.  Personally, I want to hold onto some cash and see what happens.

On Friday the S&P 500 was down 1.2% and Toronto was down 0.6%.

AutoCanada sank 8.75%. Most stocks were down.

Aecon was a rare gainer and was up 4.3% – see our updated report as noted earlier today.

This should be a most interesting week in the markets given the U.S. election.

I have never analyzed any convertible debentures and I don’t recall ever owning one. In updating the Aecon report I also took a look at its convertible debenture.

Aecon has $184 million worth of convertible debentures that were issued by prospectus in September 2018. They pay 5.0% annually (paid semi-annually). They mature on December 31, 2023. They are convertible into common shares at a conversion price of $24.00 per share. With Aecon’s shares trading at $14.22 and given that they have only very briefly ever traded above $20 it seems unlikely that the conversion privilege is worth much. Since the shares could go above $24 in the next 3 years the conversion privilege is worth something but probably very little. Investors that specialize in these options would have software or access to information about how much the conversion privilege is worth. It can be calculated using option pricing theories.

These convertible debentures trade on the Toronto Stock Exchange under the symbol ARE.DB.C. They closed Friday at $100.01.  Looking at money.tmx.com, I am not entirely sure of the trading volume. 157,000 is indicated as the volume but I am fairly sure that means $157,000 of face value which is a relatively light volume. It is best to assume that the trading liquidity in this here .

I like that these are trading at or about par value. That means we would expect our yield to be the issue yield of 5.0%. That might be attractive especially in an RRSP or  TFSA or RESP  where it is not taxable.

Be aware however, that if the company were to run into severe financial difficulty they could default on these debentures. They also have the right to redeem them in shares (at a 5% discount to the recent share price). If they did redeem in shares it would be because they are in some distress and it is possible that the value of the shares would be plunging. 

Despite some risks, a 5.0 % interest yield and a high likelihood (not a certainty though) that they will mature on December 31, 2023 at face value may be attractive. 

In contrast to bonds, these trade on the exchange which means you can sell easily and with probably not a large bid/ask spread.

A debenture is a fixed income investment. It’s like a bond but with some very key differences. Debentures are unsecured. Bonds issued by a corporation are sometimes secured with some sort of collateral. A debenture is issued against the general credit of the company (the issuer) and not against any specific assets or cashflows of the issuing company. Convertible dentures usually trade on the exchange whereas bonds do not trade on the exchange but rather are bought and sold through brokers often with high bid/ask spreads.

Our report on Aecon is updated and rated Weak Sell / Hold at $14.22.  The company reported sharply higher earnings in Q3. But it seems that this was entirely due to government emergency wage subsidies without which earnings would have declined. Perhaps I am being overly conservative by deducting what they described as the net benefit of that which then shows that adjusted earnings declined. This company is interesting because it is should benefit from government stimulus of infrastructure although that takes time. But it also has a relatively poor recent history of profits and growth. Overall it does not seem attractive but I will likely keep the small position I have in it and continue to monitor.

On Thursday, markets recovered a portion of yesterday’s losses. The S&P 500 was up 1.2% and Toronto was up 0.5%.

This week stocks are reacting to the pandemic as well as numerous earnings reports and the pending U.S. election.

Oil prices have declined again which is bad news for Alberta.

The report for FedEx is updated and it is rated Weak Buy / Hold at U.S. $264.  I had rated FedEx a Sell in early February becasue it had reported a string of very weak quarters and was forecasting that to continue in the short term. It had already taken over 5 years to integrate a large acquisition in Europe (TNT) and was continually adding back expenses related to that and the integration period was continuing which seemed like a bizarrely long time. So, with a number of stumbles, I was losing faith in management.

It did go on to post two more bad quarters and a poor fiscal year ended May 31. But then its quarter ended August 31 benefited greatly from the pandemic and the surge in online ordering. It also faced less competition from passenger airlines that usually also carry parcels.

So, its earnings outlook is now much much brighter especially as the pandemic continues. But the share price also surged greatly. Therefore, it does not rate a Buy.

It has been a surprisingly volatile company and stock over the years. And profit margins on its overnight express deliveries have been thin. It is the ground operations that are more profitable.

On Wednesday it seems that the markets accepted a doze of reality regarding the pandemic and the S&P 500 fell 3.5% while Toronto fell 2.7%.

FedEx was one of the bigger decliners – down 5.25%. I have been working on an update for FedEx. It’s latest quarter was very strong but the stock price (even with this dip) seems quite expensive and is basically assuming that FedEx will continue to benefit greatly from the pandemic.

VISA Inc. was down 4.8% but then rose slightly after-hours when it released lower but better-than-expected results. I am inclined to nibble on this high quality company especially on further dips. I added a little to my position today. Cross-border revenues (and lucrative currency exchange fees) have declined sharply but they are still benefiting from the move away from physical cash.

It’s never easy to guess the direction of the market. But I view the next week or more as a time for volatility (code for risk to the downside, since no one minds volatility to the upside).

On Tuesday, the S&P 500 was down 0.3% and Toronto was down 0.4%.

It appears that the market is taking more notice of the worsening pandemic situation.

Stocks on the rise included Shopify (3.7% after announcing a deal with TicToc that is intended to bring in more merchants for Shopify) and Amazon (up 2.5%).

AutoCanada gained another 2.6%. Analysts are expecting it to report a strong Q3 it seems.

Restaurant Brands was down 3.8% after reporting earnings.

Canadian Western Bank was down 2.7% probably related to news of layoffs in the energy sector in Alberta. But meanwhile HSBC Canada reduced its estimate for loan losses – that bodes well for other banks. 

Regarding CRH Medical: I heard a report today that the U.S. health department is suggesting that annual colon cancer screening age be moved down to age 45 and up. The same report indicated a colonoscopy should be done every 5 to 10 years while the stool test should be done annually. This would be positive for CRH if it led to more colonoscopies. But it may be that people right now would put off getting colonoscopy  procedures until the pandemic subsides. That would be negative for CRH. 

On Monday, the S&P 500 fell 1.9% and Toronto was down 1.4%.

This is really a minor pull back and should come as no surprise given the worsening pandemic and the U.S. election risk.

The biggest decline in the stocks I follow was Toll Brothers, down 5.1%. It has been gyrating lately but the trend has been down.

Cenovus declined on its takeover news. The Husky shareholders will own 39% of the combined company (I had estimated 45%) The Husky rate reset preferred share was up 9.2% to $12.50. Now down “only” 50% from its issue price. The analysts are fixated on the 21% price premium for Husky. What they maybe should focus on is what is the true value of Husky. Why is its share price on a certain day so important when that share price is quite volatile?

There was some news from Canadian Western Bank last week. Their move to a more sophisticated method of calculating risk-weighted assets has been delayed by the regulator. The new system will allow them to leverage the equity even more. I am not sure why they would really want to add to leverage at this time. I don’t know if it is related but they are also raising some added debt capital in a complicated manner. It appears only institutional investors can buy the bonds. It is a type of floating rate subordinated  debt that will float every five years with the changing yield on the 5 year government of Canada bond. It initially pays 6%. It will mature in 60 years (which seems a bit hilarious).  They can buy back this debt at par every five years. Through the wonders of the way banking works they can pay 6% on this debt because it will allow them to leverage that at least 10 times and lend out depositor money (that they pay very little on) at rates lower than 6% mostly. None of this looks like material news for CWB.

Brookfield is buying out Genworth Mortgage insurer. Presumably they do not see a huge spike in mortgage defaults coming. 

On Friday, the S&P 500 was up 0.3% and Toronto was up 0.15%.

TFI International (formerly Transforce) was up another 3.8% after releasing earnings. 

Toll Brothers bounced up 3.3%.

American Express was down 3.6%. It releases earnings on Friday. Its card spending was down. That is not surprising since it seems likely that it gets more of its spending from travel than does VISA and MasterCard.

Futures markets as of 6:20 pm eastern time on Sunday evening are suggesting a modestly negative opening for stock trading tomorrow. That does not seem surprising as we get closer to a U.S. election where the outcome may not be known for some days after the election (due to mail-in ballots and a record turn out). And where President Trump seems unlikely to accept a defeat unless it is a very clear one. And the potential for a defeated Donald Trump (if he is defeated) remaining in office until January 20, 2021 certainly seems like a scary scenario to me. I’m not sure what the market would think of it.

The big news today is that Cenovus has a deal to buy Husky Energy Inc. in an all-stock deal valued at $3.8 billion.

I know almost nothing about either company but I have a few thoughts on the deal.

Cenovus has a market cap of $4.56 billion. This will be described as a takeover. And for management it is. The Cenovus CEO takes over management of the combined larger entity. Because Cenovus will pay in stock and not cash, Warren Buffett would describe it this way in terms of what is happening to share owners: Existing Cenovus shareholders will own about  55% of the combined company and existing Husky shareholders will own about 45%. The existing Cenovus shareholders are therefore effectively trading 45% of the existing Cenovus in return for 55% of Husky. And the existing Husky owners are trading 55% of Husky for 45% of the existing Cenovus. Well, that’s how Warren Buffett views these things but I am almost positive you will not hear the deal described this way in the financial media.

The companies are estimating that there will be $1.2 billion in annual synergies. About half of that in expense reductions and half in capital spending reductions. The expense reductions will presumably require a huge reduction in head count. Layoffs are coming and this should be in addition to any recent staff reductions made or announced. This needs to be new cost reductions and therefore new lay offs due to the deal. The $600 million in capex reductions being described as a synergy is a puzzle to me. I doubt that it means they will share assets that would otherwise be under used. If they invest $600 million less, that is $600 million less in assets. Not sure how that is a synergy. Other than administrative positions it is also a puzzle to me how there can be such large synergies in two companies with different physical assets in the ground. 

I expect that this will be touted as an investment in the Canadian oil sector and as a vote of confidence. It’s not. There is not even a dollar of new investment here. In fact they are saying it is a $600 million annual reduction in investment. This is more like Husky management throwing in the towel and recognizing that its shares are not worth much more than what they were recently trading at. The future was not bright. Cost reductions were needed. 

If the market believes the synergies are real then I suppose Cenovus shares will rise on the deal. If the market believes there are no real synergies then the Cenovus shares should fall. My guess, and it is a guess, is the Cenovus shares won’t rise much if at all.

I had briefly owned a Husky rate reset preferred share issued at $25. It now trades at just $11.45. Presumably due to a low yield (low reset spread over the 5 year Canada combined with the low 5 year Canada) but also probably not a stellar credit rating. I will be interested to see if it moves up on the deal. It might if it is viewed as improving the credit strength. 

I suppose any price reaction could also be muted by the fact that this deal will take about four months before it closes and it is not a done deal until it closes.

CN Rail is updated but rated only Weak Buy / Hold at $138. It looks somewhat expensive but this has been a tremendous company to own over the long term and it will continue to increase earnings. It suffered an earnings decline with the pandemic but its volumes are now running higher than October of last year. And meanwhile they cut costs and have not called back all the laid off workers.  I’d be more interested at a lower price but those holding it might be wise to resist the urge to sell and take profits.

Here are some interesting or perhaps startling statistics from CN:

They now use just 0.85 of a U.S. gallon of fuel to move each ton an average 1000 miles.  That’s four to five times the fuel efficiency of transport trucks. Environmentalists should LOVE trains. And think about a regular pickup truck moving one ton 1000 miles. How many U.S. gallons would that be? At 10 miles per gallon it’s 100 gallons. At 15 miles per U.S. gallon it’s 67 gallons! Compare that to 0.85 for the train.

The average length of their trains in Q3 (and this is average not the longest) was 8,987 feet. That’s 1.7 miles or 2.7 kilometers. It’s not your imagination that trains have gotten longer.

Canadian National Railway Company is a very well-run operation. It is arguably the best-run rail road is North America.

Bill Gates is far and away its largest shareholder and has been for many years. He own 14% of the company personally and another 2.4% through his foundation. This, in part, is how the rich get richer.

On Thursday, the S&P 500 was up 0.5% and Toronto was up 0.3%.

AutoCanada was up 4.9% and is basically at a 52 week high. Analysts mostly rate it a Buy. It will be interesting to see how their Q3 went.

Toll Brothers was down 2.6%. 

After the close, TFI International released strong Q3 earnings and raised its dividend. It appears that the higher earnings matched expectations. If so, the stock may not react much. But it may react more to any comments about the outlook.

Given the current second wave of the pandemic and the increasing lockdowns  it seems wise to be somewhat cautious on markets at this time. Markets have had a fantastic run since the March lows. Things could obviously swing back in the other direction at any time.

On Wednesday, the S&P 500 was down 0.2% and Toronto was down 0.3%.

Toll Brothers was down 4.3%. 

CN Rail was down 6.1% after reporting Q3 earnings. This gives back a little of its recent strong gains. I plan to update the report on this company and to post that tomorrow. I suspect it will look somewhat expensive. But it has certainly been a fantastic long term investment.

AutoCanada bounced up 5.0%.

Statistics Canada reported today that:

“Prices of new homes surged across the nation in September, the largest jump in 14 years. Nationally, prices were up 1.2% in September following a 0.5% increase in August. New home prices increased in 24 of the 27 census metropolitan areas (CMAs) surveyed. Builders across the nation primarily linked the gain to higher construction costs, mainly driven by the impact of the pandemic on the demand and supply of labour and materials. The shift in buyer preference for larger homes also contributed to the rise in new housing prices.” 

Despite that Melcor Developments continues to really languish. I am optimistic that they will have had a reasonably strong Q3, at least in comparison to what must be low expectations. Home builders may be reluctant though to buy very many lots in the face of all the uncertainty. But if there is demand for new houses, even in Alberta, then builders will respond to some extent and Melcor will be selling them building lots.

On Tuesday, the S&P 500 was up 0.5% while Toronto was unchanged.

CRH Medical bounced up 5.6%. Linamar was up 3.2%.

AutoCanada was down 3.7%.

CN Rail reported earnings after the close which were apparently a little below analyst expectations. Transport stocks have dome very well in recent months. CN is now expensive in relations to its earnings.

Q3 earnings will be coming in from many companies and we see how they did as the pandemic settled in over the summer.

The latest Teranet index of the price changes on existing (as opposed to new) homes was out today and shows year-over-year gains as of September in most of Canada -There were double digit year-over-year price gains in Halifax, Ottawa, Montreal and Hamilton. Edmonton was down 0.8% and Calgary was down 2.8%. September saw increases versus August in all the major cities in Canada although Calgary was only up 0.1%. The bottom line is that the prices for existing houses were strong in September. Low interest rates are supporting demand for existing and for new houses.

Markets were lower on Monday due to fears that a U.S. economic stimulus package may be delayed.

The S&P 500 was down 1.6% and Toronto was down 1.0%.

However, AutoCanada was up 7.8%. It has been bouncing up and down without any apparent news to explain the bounces.

Alcanna was up 6.8% and could certainly continue to do well.

Canadian Tire had another strong day, rising 3.0%. 

On Friday, the S&P 500 was about unchanged while Toronto was down 0.4%.

Canadian Tire was strong with a 2.8% gain.

Toll Brothers was down 2.4%.

Stock futures suggest that stocks will rise on Monday du to optimism about economic stimulus talks in the U.S. 

The market so far seems unconcerned about the rising COVID-19 cases and the various lockdowns. The market also seems unconcerned that the November 3rd election could cause uncertainty and that the results may not be clear until some days after the election.

On Thursday, the S&P 500 was down 0.15% and Toronto was up 0.3%. 

Ceapro was up 10.9%. But it’s a penny stock and tends to be quite volatile.

Canadian Tire was up 2.3%. One aspect of Canadian Tire that looks weak to me is its Party City chain. I happened to be near one of their stores yesterday around noon. The overall impression it made on me was that it was very junky. The place also smelled bad. Prices on things like paper plates looked high compared to Dollarama. Also, I was just about the only customer in the store. To some extent this chain competes with Dollarama and that is not good because Dollarama is extremely good at what it does. I was in a Dollarama this week and the immediate impression was of a bright clean orderly and well-stocked store. Many of the items it sells are made for Dollarama and come packaged with their logo.  Party City is just not in the same league. Canadian Tire will have to literally clean up those stores if it is going to succeed in that business.

There was news today about how strong the Canadian housing market is in terms of sales and prices for existing homes. Meanwhile Melcor Developments stock price continues to lanquish badly. I suspect that their Q3 results will be better than the market appears to expect.  After the close, the Melcor REIT confirmed its cash distribution for the next three months.

I sold more of my Toll Brothers shares today to raise cash. I still have a relatively large investment in Toll Brothers.

On Wednesday, the S&P 500 was down 0.7% and Toronto was down 0.3%.

CRH Medical was down 4.4%. Possibly this is due to fears that the clinics provides anesthesia services in will  be closed due to lock-downs or that patients will stay away due to fears about the virus.

I will likely further reduce my large position in Toll Brothers tomorrow. I am inclined to increase my cash position at this time.

On Tuesday, the S&P 500 was down 0.6% and Toronto was down 0.3%.

AutoCanada was down 4.8% giving back a little of its recent strong gains.

RIWI was up 4.1%.

The Boston Pizza units were down 3.3%. After rising in response to the resumption of monthly cash distributions at a rate that was higher than expected, these units may now tend to drift down somewhat as the market will worry about renewed restrictions on restaurants and the end of patio season. 

The reports on three rate reset preferred shares are updated on the Subscriber Home Page. All are rated as Buys. Rate reset shares are unique and cannot be compared to other investments on the basis of yield alone. Their prices react to interest rates in a far different manner than do dividend paying stocks, bonds or perpetual preferred shares. Rate reset preferred shares may or may not be suitable as part of a portfolio depending on views on the future of interest rates and also depending on the desire for  (somewhat) tax-efficient cash distributions.

With some cash on hand, I am tempted to add to my rate reset positions. But I will likely resist that temptation on favor of holding he cash as we move through this U.S. election period and also as we move through the next stages of the pandemic.

On Monday, the S&P 500 was up another 1.6%. Toronto was closed for the holiday.

Most of the recent U.S. market strength is ties to hopes for a giant government stimulus package. There is something pathetic and wrong when the private sector stock market is so dependent on government stimulus.

Amazon was up another 4.75%. It often seems like there is no limit to how high that stock rises. I plan to take a look at its financials again after the Q3 earnings are released and try to understand it. Revenues are always soaring but profits tend to be low in relations to the stock price.

Apple was up 6.35%!

The Canadian government announced a new subsidy plan to help with commercial rent of smaller businesses. In this plan the landlords do not have to contribute anything (in the expiring plan they had to eat 25% of the rent). I will be interested to see if this is seen as positive for RioCan and the Melcor REIT. I would think it would be somewhat positive. But on the negative side is the second wave of the pandemic.

On Friday, the S&P 500 gained another 0.9% and Toronto rose 0.2%.

Amazon was up another 3.0%.

AutoCanada was notable with a 5.1% gain to close at $22.18. I am surprised how strong it has been. Apparently the analysts that cover it have mostly been rating it a Buy. According to TD Direct, four of the six analysts rate it a Buy. The National Bank analyst rates it a Sell. Most or all of these same analysts had been “burned’ by this company over the past few years as it underperformed especially under the prior management.  It seems I was overly cautious in trimming my position but that was prudent for me as it was a fairly large position and many uncertainties remain. It will be interesting to see its financial statements and its earnings for Q3.

I trimmed my TFI International position on Friday to take advantage of the gains there and to raise cash. I am 20% in cash and would not mind being closer to 25% or more in cash (or safe short-term  fixed income) as the U.S. election looms as well as the second wave of the pandemic.

The Toronto stock exchange will be closed for the holiday tomorrow but the U.S. markets will be open.

On Thursday, the S&P 500 was up 0.8% and Toronto was up 0.65%.

Toll Brothers was up 3.8% to $49.23. It’s very close to a 52 week high. It got over $50 in February. But it was also over $50 in late 2017. Before that it had an all-time high of something over $55 in a “needle peak” reached in the Summer of 2005 back at the height of a U.S. housing boom prior to the financial crisis. It’s been a bumpy ride. Book value per share today is about double what it was back at that 2005 peak.

Alcanna was up 5.1% to $4.97 and is also approximately at a 52 week high. This has been  a  bumpy and mostly downward ride since it peaked over $25 around the end of 2007.  But it is doing better now and seems to have potential.

Market were up sharply on Wednesday. The S&P 500 was up 1.7% and Toronto was up 1.2%.

Among the bigger gains were:  TFI International – up 4.1% to a new high. Shopify – up 3.0%, Alcanna- up 5.6%. FedEx – up 3.5%, AutoCanada – up 7.9%,  Linamar – up 3.5%.

I am not aware of any news to explain AutoCanada’s recent increase. Checking insider trading, there has been no insider trading since June other than an August 13 filing when a Halifax-based owner of about 40 dealerships in the Maritimes announces it had taken a 10% position in the company. That entity has apparently added no further shares. Possibly some investors are now following the knowledgeable Halifax entity into the stock. A few days ago it was reported that September auto sales in Canada were slightly higher than the year-ago Spetember results – the first year-over-year increase in I believe at least one year. That is a positive development, but it is hard to understand why the stock is up quite so much. I trimmed my position somewhat today.

Meanwhile Melcor Developments was down 4% today to $5.90. Checking insider trading in that company, I see that several insiders have bought shares in recent weeks and in one case today adn in another case yesterday. They will now be in a blackout period until Q3 earnings are released. I also see that the company itself resumed buying back shares as of August 21. This indicated confidence. The fact that the company is buying back even a few shares (they are limited to very few  – 1000 per day- due to the thin trading volume) indicates that the company does not believe it is going to be in financial difficulty.  Melcor’s shares appear to be significantly under-valued. The latest report shows that the Edmonton home resale market was quite strong in September. That would seem to bode well for Melcor’s ability to sell single family home building lots.  Calgary also reported a strong September, particularly for detached single family homes. Despite my already large position in this company, I added a few more shares today.

After the close, Costco reported same-store sales surged once again in September compared to September 2019.

On Tuesday, stocks were down after President Trump announced that he would end negotiations (with the Democrats) on a hoped for stimulus package until after the election. 

It’s rather sad and ironic  that the private sector and stock markets, the supporters of which so often criticize government spending, has become so very extremely dependent on government stimulus.

The S&P 500 was down 1.4% and Toronto was down 1.1%.

The number of home sales in Toronto surged 42% in September versus 2019 and most of the increase came from single-family homes and prices hit a new record high. As a holder of shares in Melcor Developments, I am hopeful that home sales figures (and home starts) in Alberta will also be higher than the market appears to expect.  

Monday was a very positive day for stocks as the S&P 500 gained 1.8% and Toronto gained 1.3%.

Among the more notable gains: Boston Pizza Royalties was up 7.1%, TFI International was up 4.7%, AutoCanada was up 3.9%,and  Andrew Peller was up 4.3%.

Meanwhile, Quebec and Ontario certainly seem to be stumbling in their pandemic response efforts with new closures and with contact tracing collapsing in Ontario. The market so far seems unconcerned.

The U.S. continues to do very poorly regarding the pandemic. And the President tonight doubled down on his strategy of downplaying the virus.  

On Friday, the S&P 500 was down 1.0% and Toronto was down 0.5%. That was a modest decline in the face of news that the President has the corona virus.

Apple was down 3.2%, Amazon was down 3.0%.

The big winner was the Boston Pizza Royalties Income Fund which gained 43% to close at $7.75 after announcing that it would reinstate monthly distributions at the rate of 6.5 cents per month. That is a yield of 10.1% which is attractive if it is viewed as sustainable and especially if it is viewed as having potential to rise – both of which are arguably true.

The Fund announced that the BP restaurant revenues had recovered to 84% of the prior year’s level as of August and had been at 81% in July. That is impressive and more than I would have expected given seating restrictions. Take-out sales must have been impressive.

6.5 cents is 64% of the 10.2 cents it had paid in February and March. And it is 57% of the 11.5 cents it had been paying out for several years until they cut with the February distribution.

This 6.5 cents is better than I was expecting when I recently mentioned BP and updated the report on September 8.

Part of the reason the for such a big gain was that the unit price had been particularly weak in the past two weeks. The big jump also indicates that the Fund has been able to keep this news a complete secret until it came out. That’s the way it should be.

Overall, the units would seem to be attractive at this price. But we might also expect continued volatility due to the impacts of the second wave of the virus.

As of Sunday evening, the futures markets are indicating a positive day in the markets on Monday.

On Thursday, the S&P 500 was down 0.5% and Toronto was down 0.4%.

Shopify was up 2.9%.

Constellation Software was up 3.5%.

AutoCanada was up 3.7%. September light vehicle sales were released today (amazing that we get them this quick). and showed a slight increase for this September versus last year. That is the first year-over-year increase in a long time. That bodes well for AutoCanada.

After the close the Boston Pizza Royalties Income Fund announced that distributions will be reinstated this month at 6.5 cents per unit. That’s lower than the 10.2 cents that it was prior to the shutdowns and lower than the 11.5 cents that applied since early 2016 until it was reduced in early 2020. But it is higher than I would have expected. BP’s royalty sales in August had recovered to 84% of the August 2019 levels and July was at 81%.  That seems impressive. BP closed at $5.41 today, so the yield would be 14.4% on that price. Even considering that we are in for more restaurant restrictions in Quebec and probably soon in Ontario, these PB units would seem attractive at this price. I would expect a significant jump in price at the open on Friday morning.

Markets apparently took little notice of last night’s presidential debate as the S&P 500 rose 0.8%. Toronto, however was down 0.6%.

Toll Brothers bounced up 3.3%.

I notice Bombardier is down to a pathetic 33 cents. That’s basically pricing in the possibility that it will go bankrupt. While the Quebec government will likely try to protect the jobs at Bombardier they are far less likely to protect the share owners – nor should they.

Meanwhile the Bombardier preferred shares series B, C and D trade at prices of $7.20, $9.15 and $8.80 respectively and offer high yields. I would be very leery of these. Years ago we had the series C shares rated Buy on this site. But on October 19, 2017 I explained why I was selling these shares at $17.44 at a loss compared to the price paid and they were dropped from our list. If Bombardier were to declare (admit reality?) bankruptcy then its debt holders would end up owning the assets. Common equity shares would almost certainly be “wiped out” – which is why they are down to 33 cents. But it seems to me that preferred share holders would also likely be “wiped out”.  I may be wrong, but I would sell those shares if I owned them.

Markets were negative on Tuesday with the S&P 500 down 0.5% and Toronto down 0.2%.

Toll Brothers was down 4.5%.

Melcor Developments was down 4.55% to $5.87. Today’s dip may have been related to lower oil prices. I continue to find it difficult to understand why Melcor’s price should be so low.  The book value per share is $32.76 or 5.6 times higher than the share price, 460% higher than the share price. I find it hard to believe that the accounting rules would allow the book value to over-state the true value by 460%. Traditionally the accounting book value was always meant to be conservative. This is the complete opposite.

It’s certainly true that the Alberta economy faces hard times and that home building is significantly down from the peak years. But the building of single family homes has not ground to a halt. The population of Alberta is not declining, it is still growing. Melcor does not appear to be in any danger financially.  With record low interest rates, the price of homes in Alberta has not declined very significantly. The Teranet home price index shows a decline of 8% from the peak values. It’s just not clear to me why the market should value the equity in Melcor’s assets so  very much lower than the book value.  

Meanwhile, AutoCanada was up 10.8% today. I did not see any news to explain that. 

Watching the presidential debate tonight, I don’t see why the market is not more worried. President Trump  stated (once again) near the end of the debate that he will not accept that the election was fair if he loses. He repeatedly states that the mail-in ballots are a big problem. He specifically refused to say that he would ask his supporters to remain calm between election day and the time when all the mail-in ballots are counted. If he is ahead on election night (because republicans are more likely to vote in person) and loses after the mail-in ballots are counted I would expect wide-spread riots in the streets of America.

Markets were strong on Monday as the S&P 500 rose 1.6% and Toronto rose 1.1%.

Some of the more notable gain on our list were: AutoCanada – up 4.2%, Canadian Western Bank up 3.2%, and Linamar – up 3.4%.

As mentioned this morning, our report on Toll Brothers is updated and rated (lower) Buy at U.S. $47.89. It’s done well this year and could keep rising. But it could also decline if the currently hot market for new homes in the U.S. cools off due to the pandemic or other reasons.

Markets are noticeably higher this Monday morning.

AutoCanada is up 8% and Canadian Western Bank is up 3%.

The report on Toll Brothers is updated and rated (lower) Buy. It has done very well and its next quarterly report should be very strong. New home sales are very hot in the U.S. at the moment. But, Toll Brothers has been quite volatile in the past and could decline if new home sales begin to slow again. It had become my largest position and so I have just reduced my position somewhat for that reason and to raise cash.

The markets seem to be ignoring a lot of risks around the outcome of the November 3 Presidential election as well as the pandemic . Some caution is warranted.

Friday’s trading session ended with the S&P 500 up 0.3% and Toronto up 0.6%.

Costco reported earnings after the close that were said to exceed expectations for both revenue (where expectations were already high) and earnings. But the shares fell a bit in after -hours trading becasue th e COVID-related costs were higher than expected. Costco is still paying a $2.00 per hour bonus and plans to continue, they said at least through October. Good for them!

I have added Alcanna Inc. to our list rated Speculative Buy at $3.14 (It closed today a bit higher at $3.20). This is primarily an  Alberta liquor retail chain with 194 liquor stores in Alberta and 32 in B.C. It also has 31 Cannabis stores in Alberta and 1 in Ontario and plans to open about 6 more in Ontario this fall. The company is under relatively new management.

It actually has quite a poor recent profit history until Q2 2020 when it had a large GAAP profit mostly on selling its stores in Salsa and was also reasonably profitable on a adjusted basis due to a surge in liqour sales with the pandemic. It seems all but certain that it will have had strong sales growth in Q3 as well. The insider trading signal is quite strong. So, the thesis in buying this is that this is a recovery from prior poor results that will continue due to better management and due to the ongoing pandemic. And also the decision to buy is supported by the insider trading signal. But this is a speculative pick considering its poor recent history.

We actually had this company on the list for a number of years under its former name Liquor Stores N.A. We had given up on the company and concluded that the management at that time was very poor. The last rating on it was Sell and that was as of August 29, 2014 at $13.37 and it was rated Sell to start 2015 at $15.40. It was rated Sell at the start of 2016 at $8.37 but managed a gain that year. It was dropped from our list by the start of 2017. New management took over in 2018 and appear now to have probably turned things around finally.

Here is some good news: The Edmonton Airport will pilot a saliva test that gives a positive or negative result in under one minute. It is true that people could still be positive but not yet testing positive. But the risk that a traveler is positive after testing negative in a saliva test would seem to be very low. That combined with the masks and distancing we are all doing should be enough to eliminate the 14 day isolation (for those testing negative) if there is any sanity left. But that sanity part is very questionable because those people who never travel are liable to loudly protest eliminating the 14 days isolation.

Wednesday was a negative day for markets which was blamed on the U.S. FED suggesting that the government needs to act to stimulate the economy while the market fears this will not happen anytime soon. The ongoing pandemic as we roll into the Fall of the year also contributed to a negative sentiment.

Among the relatively few stocks that rose were Canadian Tire – up 3.3%, and Couche-Tard up 1.5%.

The speech-from-throne included news that the emergency wage subsidy for businesses will continue through to the start of next summer. One company that should benefit is AutoCanda. They indicated that they had a benefit of $26 million form that program in Q2. There may be certain scenarios where a labour-intensive company’s revenues are down just enough to qualify for the wage subsidy and it could turn out to be more profitable than normal operations.

I will shortly be adding Alcanna to the list probably rated Speculative Buy. I would warn that it has a very poor recent history. But it is under newer management and it is benefiting quite a bit from the pandemic. Same-store liquor sales were up 13.4% in Q2. It now looks poised to continue to be profitable. The details will be in the report that I will post when it is completed. But I wanted to mention this now since I may buy some shares tomorrow (Thursday).

Markets were positive on Tuesday with the S&P 500 and Toronto both up 1.0%.

Notable gainers included lululemon, up 6.1%, Toll Brothers up 2.5% and Canadian Tire up 3.3%.

Indications are that the market will open moderately higher this morning.

Canadian markets will be reacting to the throne speech later today.

Monday was a negative day for most stocks as the S&P 500 fell 1.2% and Toronto fell 1.3%. During much of the the trading day the decline was closer to about 2% but there was some recovery near the end of the trading day.

AutoCanada was one of the bigger decliners, down 8.9% to $16.50. Interesting how the buying interest that pushed it up over $19 can suddenly evaporate despite no news from the company.

Penny stock Ceapro was down 10.3% to 70 cents and traded as low as 60 cents today. But volatility is to be expected with penny stocks.

RIWI was up 9.8% but is also relatively volatile…

Toll Brothers was up 5.1% after it announced that its net signed contracts in the first half of the current quarter (The six weeks ending September 15) were up 110% versus last year and that it was increasing its prices to manage the pace of growth, to offset cost increases and to increase profits.

On Friday, the S&P 500 was down 1.1% and Toronto was down 0.3%.

Shopify was up 4.0%. 

Apple was down 3.2% to $106.84. That’s a significant drop from its peak of $137.98 reached at the start of September when there was a lot of excitement around its stock split.

AutoCanada was up 2.2% to $18.12 which was a good showing on a day of market weakness.

On Thursday, the S&P 500 was down 0.8% and Toronto was down 0.3%.

RIWI, which has been volatile was up 10.8%.

Toll Brothers was down 1.3% and announced before the close that it had made a small acquisition in Colorado which has has been one of the strongest housing markets in the U.S.

On Wednesday, the S&P 500 was down 0.5% and Toronto was down 0.8%.

Shopify was down 4.9% to CAN $1166 or U.S. $ 885 as it announced that it will issue about 1.3 million shares in the U.S. at U.S. $900. This will increase the share count by only about 1% which should not a big concern. Shopify has been very astute in taking advantage of its high share price to raise cash from time. This has given it a war chest of cash.  The result is that if the share price were ever to fall substantially, Shopify would be in no danger from that and could go on growing for a long time without needed to issue shares.

Bombardier (which I used to follow but gave up on a long time ago) managed to rise 2.5 cents today which was 6.1% of its pathetically low share price. It is a real shame, almost a financial crime how badly managed this company has been for the last 20 years. After the announced sale of its transportation division goes through (which will take months) it will still be saddled with huge debts. I certainly would not rule out a bankruptcy in its future.

Our report on AutoCanada is updated and rated Sell at $17.90. I sold more of my shares in it today. Looking at its numbers I am baffled by how high the share price has risen since March. It not only recovered from the March lows but it is far higher than it was one year ago. Certainly management has made good progress. They do appear to be out-selling their competitors. But they have continued to have to write-off various assets and have become quite weak financially with a very poor credit rating and high borrowing costs. Debt has been paid down but at the cost of selling off many dealerships in sale and lease-back transactions.  On a positive note, a very successful and large chain of auto dealers in Atlantic Canada has bought 10% of its shares. This investor is knowledgeable about the industry and so perhaps there is potential here that I am no longer seeing. For that reason, I may hang onto a modest position. But in general, I view the current price as an opportunity to get at least partly or mostly out of this company.  In my case I was over-exposed to it and it was appropriate to at least reduce my position. AutoCanada has been a disappointment. Its former management made a disastrous U.S. acquisition. It was also hit by the Alberta recession. The pandemic has not helped although they have come through that surprisingly well. It may have a good future operationally, but its lease costs and higher borrowing costs are going to be a problem most likely.

On another positive note they are benefiting from government programs and booked $26 million in federal wage subsidies in Q2 and they also may qualify for the small business rent relief as individual dealerships may qualify. I suppose that could contribute to a surprisingly good Q3 – but those programs will end.

On Tuesday, the S&P 500 rose another 0.5% and Toronto was up 0.4%.

Restaurant Brands was up 3.1%.

AutoCanada was down 3.5%. As mentioned, I took advantage of its higher price yesterday to sell about 40% of my shares in this company. I was over-exposed to the company as it recently represented about 8% of my portfolio. That was reason enough to reduce it. Looking closely at it today, I don’t regret selling. It’s price rise seems over-done. It has done very well operationally with surprisingly good sales numbers in the face of the pandemic. But it has also continued to write off various assets. And I certainty don’t like the way that many of the write-offs are somewhat dismissed as being “non-cash”. They do have a hard focus on building up cash and reducing debt. But when that is done largely by selling off assets in sale-and-lease-back transactions it is not that impressive.  I will post an update for AutoCanada probably tomorrow. I am inclined to reduce my position further.

Markets rose once again on Monday with the S&P 500 up 1.3% and Toronto up 0.85%.

American Express was up 3.8%. Restaurant Brands was up 3.5% and Apple was up 3.0%.

Riwi Corporation was down 12.1% and is worth considering as a speculative pick.

AutoCanada ended the day down 0.4% at $18.80. Earlier in the day it got as high as $19.79. I sold about 40% of my shares in this company today to take advantage of the recent increase and becasue I was over-weight in this company. I had added to my position in 2019 and 2018 at lower prices and so I was able to sell at a good gain despite the price still being well down from where I originally started buying this stock. It may continue to do well but I was not sure that all of the recent run-up was justified and it has had a history of volatility. One thing I noticed was it had good trading volume. I was easily able to sell several thousand shares without having to offer the shares below the last traded price.

The report on WSP Global is updated but rated only Weak Sell / Hold at $89.16. The company looks expensive and seems to be projecting an earnings decline for this year due to the pandemic. But it also has a strong history. If I held it and was looking to raise cash I would probably reduce my position. I have never owned this one.

On Friday, the S&P 500 was up 0.05% and Toronto was up 0.2%.

AutoCanada was up 7.4%. It has made a very strong recovery off its lows. At this point, it might be wise to trim the position for those who are over weight it. It has had a history of causing pain to investors. The current management is probably far far better than previous management. But it is not clear that the recent run-up is totally justified.

We are now moving into the more intense phase of the U.S. election. This seems sure to cause some market volatility. Fareed Zakaria (who is on CNN but is nowhere near as biased against trump as most of CNN) explained that on Election night Trump is likely to (appear to) win but then he is likely to lose when all the mail-in ballots are counted. That’s because republican voters are more likely to vote in person on election day as Trump has urged. Democratic voters are more likely to use the mail-in ballots. This is a very scary scenario since Trump has already said that the mail-in ballots can’t be trusted. You would think this could be solved by finding a way to count most of the mail-in ballots on election night. Or by refusing to release results until enough ballots are counted. Fareed did not even mention those possible solutions – presumably becasue they are not likely to happen.

On top of this, Trump has urged republicans to break the law and vote both by mail and in person. This could get very ugly. 

On Thursday, markets bounced down with the S&P 500 down 1.8% and Toronto down 1.2%. 

Apple was down 3.3%.  Couche-Tard was down 3.7%.

Possibly the market is starting to focus on the U.S. election which certainly appears set to be ugly and divisive. There is also the virus situation to worry about. 

My next update will be for WSP Global which so far has been weathering the pandemic fairly well. 

Stocks moved higher on Wednesday as the S&P 500 rose 2.0% and Toronto was up 1.7%.

Notable gainers included: Couche-Tard up 5.0%, Metro Inc. up 3.3%,  Apple up 4.0%,  Toll Brothers up 3.7%, Amazon up 3.8%,  AutoCanada up 3.5%, And Andrew Peller up 3.5%.

A notable decliner was lululemon down 7.7% although headlines say its earnings beat expectation. Perhaps they did not beat expectations by as much as expected? (Which makes no sense)

Markets were down on Tuesday with the S&P 500 down 2.8%. Toronto was only down 0.7% and that was in spite of a big drop in oil prices.

The recently high flying tech names that I follow were down. Apple – down 6.7%, Shopify – down 4.4%, Amazazon down 4.4%.

Aurora Cannabis which has looked like a bankruptcy candidate for some time was down 10.8% after announcing  a huge write-off.

AutoCanada was up 6.0% although it did not release any news.

Wine maker Andrew Peller was up 5.6% after releasing earnings.

Our report on the Boston Pizza Royalties Income Trust is updated and rated only Speculative Weak Buy / Hold at $6.73. The pandemic has totally changed their world and they suspended cash distribution in March. As of Q2 their revenues in the Fund were down by about 50%. This will now be improving. But the bank has imposed higher interest rates as well as a requirement to use some of their cashflow to pay down debt. The distribution is expected to be reinstated by the end of this year. But it’s probably prudent to assume that the distribution will initially be no more than about half of the former level. That would still be a good yield at just over 10%. But even that is not a certainty. It could be bought or held on speculation that things will get better but it remains risky given all the uncertainties.

If bought at this price it should be bought as more a speculation on a higher unit price as opposed to buying for a cash distribution since the distribution level that will be reinstated is unknown.

It is most unfortunate because previously it looked like a very steady provider of distributions.

Markets declined on Friday as the S&P 500 fell 0.8% and Toronto fell 1.4%.

Notable decliners included:  lululemon – down 4.4%, Shopify – down 4.5%,  Dollarama – down 3.1% and Constellation Software -down 3.0%.

As of Monday evening, stock futures suggest that the markets will recover somewhat on Tuesday.

On Thursday, markets had their first significantly down day in quite some time. The S&P 500 fell 3.5% and Toronto was down 1.5%.

Accordingly, most stocks were down on the day. Some of the biggest declines among the stocks on my list were:

Apple- down 8.0%
Shopify – down 5.1%
Amazon – down 4.6%
lululemon – down 5.1%

There were no stocks on my list that rose any noteworthy amount.

My next update will be for the Boston Pizza Royalty units. The unit value depends on the extent to which BP restaurant sales can be expected to return toward prior levels and how long they will remain depressed. Also how many BP restaurants will simply close.  It would be difficult to estimate those numbers.

Wednesday was a very strong day in the markets as the S&P 500 rose 1.5%. Toronto, however, managed only a 0.3% gain.

Notable gainers included:

Couche-Tard up 7.5% on its strong earnings report.
Restaurant Brands – up 3.9%.
Fortis – up 2.6%
Starbucks – up 2.7%

After the close, Costco reported August same-store sales growth of 14.5% (excluding volatile fuel prices and the impact of foreign exchange. For the quarter just ended the same-store sales gain was 14.1% and e-commerce was up 91%. These figures are versus the same time period one year ago. It’s not clear to what extent the gains are due to people eating at home rather than in restaurants and to what extent it is due to Costco taking market share from other retailers. Inflationary price increases would also explain some of the gain. These results are obviously good in terms of Costco’s share price.

Stocks were mostly higher on Tuesday. The S&P 500 was up 0.75% and the Toronto index was up 0.8%.

Shopify was up another 6.7%. lululemon was up 4.2%. Apple was up 4.0%, Toll Brothers was up 4.0%. AutoCanada was up 7.3%.

After the close, Couche-Tard posted what appears to be blow out earnings despite a big drop in fuel volume sales.

Stocks were mostly lower on Monday as the S&P 500 declined 0.2% and Toronto was down 1.15%.

But Apple was up 3.4% as it began trading on a four for one stock split basis. And Shopify was up 2.3%.

AutoCanada closed down 2.85%.

RioCan was down 1.7%. In related news the Canadian government is extending the small business rent relief program another month. While that program requires participating landlords to “eat” 25% of the rent, my understanding is the REITs generally view that as a favorable program. They are basically okay with eating 25% of the rent for some of their struggling small business tenants if the program (which pays 75% of the rent for the small business)  helps keep those tenants in business.  With RioCan down over 2% earlier today I added a little to my position.

Statistics Canada reported building permit data for July. In Alberta the decline was 9% versus July of 2019. That seems like a modest decline in the face of the oil price drop and the virus situation. For Canada overall the decline was similar to Alberta at 10%. 

Berkshire Hathaway News:

This morning there was news that Berkshire had invested $6 billion dollars into “five of the leading Japanese trading companies”. $6 billion a large investment but it is not really all that material to Berkshire which has over $800 billion in assets including about $140 billion in cash. So not a big deal at all as far as Berkshire’s future prospects.

What caught my interest was this term “trading companies”. What did that mean? Were they stock and bond trading companies akin to Goldman Saks? Or were they merchandise traders of some kind? None of the headlines I saw explained this point and neither did the short press release from Berkshire. In fact it appears that what was meant is simply that these were five of the largest publicly traded companies in Japan.  An interview on BNN described the companies as “trading houses”. That appears to me to be wrong.The BNN interview also called them conglomerates and that looks closer to the reality. 

An interesting point about Berkshire’s press release was that it was released in Tokyo Japan. It was required to be released by Japanese regulators. Perhaps that means nothing. The press release was likely written in Omaha and simply released in Tokyo. 

Another very interesting aspect of the Berkshire press release is that it gave an email contact for Berkshire’s investor relations contact.  That interests me because Berkshire has famously NEVER had an investor relations department. They don’t do analyst conference calls. They don’t respond to analyst questions. All investors were always free to read their financial statements and attend the famous annual meetings. Analysts never got ANY preferential access. The contact on the press releases has always been the phone number for the Chief Financial officer. And I suspect no ordinary investor (or maybe even any large investor) and no analyst was ever going to get through by calling that number.  The inclusion of a Berkshire investor relations email may signal some kind of change at Berkshire. Head office is famously extremely lean consisting off about 25 employees. I am surprised that they are now apparently going to be responding to emails which will no doubt flood in. (Is the head office employee count about to “balloon” to 30 or something?)

The report for Stantec is updated and rated Weak Buy / Hold at $42.35. 

Penny stock Ceapro has doubled since it was last updated in June and is now updated and rated Speculative Buy at 80 cents. After a few years of reporting losses it is once again reporting profits and strong cash flows from its existing revenue sources. These profits are being used to fund promising research that could potentially lead much larger profits .  It is definitely a speculative stock and is rated Speculative Buy at 80 cents. 

Friday was yet another positive day for U.S. stocks as the S&P 500 rose another 0.7%. Meanwhile, Toronto was down  0.15%.

Canadian Western Bank was up 7.6% after reporting good earnings on Friday morning. It’s provision for loan losses was lower than expected. CWB has a great history of avoiding much in the way of loan losses. The reality is that n o one knows what level of loan losses will ultimately occur due to the pandemic and lower oil prices. But CWB believes the losses will be quite manageable. If they are right then CWB’s share price will continue to recover.

So far markets are ignoring what appears to be considerable unrest in the U.S.  Now that September is upon us the market my turn its attention more to the divisive election campaign that is about to kick into high gear.  The virus situation may also be set to get worse with schools opening. Overall, there would seem to be reason to be cautious on the outlook for stocks in general.

On Thursday, the S&P 500 managed yet another small gain – rising 0.2%. Meanwhile, Toronto was down 0.35%.

American Express was up 3.2% and RIWI, which is a very small company was up 9.0%. 

My next update will be for Stantec. 

On Wednesday, the S&P 500 was up another 1.0%. Toronto was also up 1.0%.

Shopify was up an impressive 5.1%. Canadian Tire was up 3.4%. Constellation Software was up 3.3%.

AutoCanada was down 5.9%

The latest rail car loading report out today shows U.S. rail traffic continuing to recover and getting close to last year’s level. The figures for Canada turned down this latest week and remain well below last year’s level.  In Canada, petroleum shipments remain very weak.

On Tuesday, the S&P 500 rose another 0.4% while Toronto was down 0.1%.

Starbucks was up 5.1%. Shopify was up 3.8%.

After the close, Toll Brothers reported strong results. How the stock price reacts will depend on the extent to which strong results were anticipated. The stock is up 2.6% in after-hours trading.

The Q3 bank earnings season is underway for Canadian banks. Bank of Nova Scotia disappointed with higher loan losses while Bank of Montreal exceeded expectations.

Monday was another positive day for stocks. In large part due to hopes for COVID-19 treatments and vaccines as Trump accelerates certain approvals.

The S&P 500 was up 1% and Toronto was up 0.7%.

Among the gainers: Linamar was up 3.25%, AutoCanada was up 5.3%. , America Express up 3.3%,.

Ceapro was down 6.3%. This will likely continue to be volatile. One worry here is that the company would probably be eager to issue more shares as the price rises. And they have long used an investor relations / stock promotion type firm to try to get their price up. For the most part it has not worked. But occasionally the stock could rise because it is being promoted. I’d always rather see a stock rise because it deserves to. I think Ceapro did deserve this latest rise.

On Friday. the S&P 500 was up 0.3% while Toronto was down 0.5%.

Penny stock Ceapro continued to climb, rising 6.7% to 96 cents. 

Toll Brothers rose 3.7% as American home building continued to be surprisingly strong.

Apple soared another 5.1%.

AutoCanada was down 3.5%.

Futures currently suggest a positive start to Monday’s trading.

Having just updated the Melcor REIT and RioCan REIT it seems appropriate to compare the two.

Looking at yield, the Melcor REIT is at 9.1% and RioCan at 9.3%.  On that basis (in isolation of other facts) RioCan would be the clear choice.  However, the Melcor REIT reduced its distribution by 47% in response to the pandemic while RioCan maintained its distribution. It seems quite possible, even probable, that the Melcor REIT will be able to at  partially reverse that 47% cut before too long. That is a point in favor of Melcor.

Looking at price to book value, RioCan is at 64% and Melcor REIT is at 43%. So Melcor looks cheaper on that basis. But then again RioCan has better assets. The Melcor REIT includes some older office buildings with significant vacancies.

Looking at debt leverage, the Melcor REIT has debt of 167% of its book equity level while RioCan has only 86%. In effect the Melcor REIT is much more dependent on the kindness of bankers and has relatively less capacity to borrow additional money. This is a point strongly in favor of RioCan.

In the Melcor REIT’s Q2 report I was a rather shocked to learn that they asked for debt and interest deferrals on mortgages including even on some private vendor take back mortgages. If any company owed me money and then came along asking to defer payments, I would get rather worried. In contrast while RioCan indicates that it did defer some property taxes under government programs, I saw no mention of deferrals on debt or interest payments.  RioCan appears to be in a much better position regarding liquidity.

Overall, while I am attracted to buying the Melcor REIT units at a 57% discount to book value, the safer alternative is RioCan with its 36% discount to book value but with superior assets and much better geographic diversification and with its much better liquidity position. 

I own both and did add a little to my Melcor REIT position but I added more to my RioCan position.

The report for RioCan is updated and rated (higher) Buy at $15.56. The yield is attractive at 9.3%. There is some potential for a cut to the distribution due to the impacts of the pandemic. But management maintains they are comfortable with the current level. This is a well managed entity with very high quality assets.  If in fact there ends up being no cut to the distribution then it seems likely that the units will move up in price  possibly back towards the $25 level and certainly something above $20 would seem reasonable. Nevertheless there is also a risk that the whole physical retail sector is to be avoided due to the move to online. So, as always there are no guarantees but at around $15.56 these units appear to be attractively priced.

On Thursday, the S&P 500 was up 0.3% and Toronto was up 0.2%.

Various “tech” stocks continue to soar including Amazon – up , Apple – up 2.2%, Shopify – up 2.6%, and Constellation Software – up 3.5%, 

Ceapro was up another 9.9% after reporting a strong Q2. This penny stock may be volatile but it certainly could go a lot higher if some of its research efforts pay off. It closed at 89 cents today with a high of 92 cents. This is a stock that someone managed to buy and someone was unlucky enough to sell at as low as 14 cents at the lows earlier this year.

I will post the update to the RioCan report tomorrow. I may add to my position in it tomorrow. 

Markets were mostly moderately lower on Wednesday with the S&P 500 down 0.4% and Toronto down 0.3%.

My next update will be for RioCan. Reading its (very detailed) Q2 report I was very impressed with this entity and its prospects. Sure, it has its struggles right now with lower property values and bad debts. But the yield is over 9% and management appears to believe that it can sustain the distribution. I have not yet completed the analysis but this appears to be a Buy to me. 

On Tuesday the S&P 500 closed at a new record high as it rose 0.2%. Toronto was down 0.2%

Penny stock Ceapro was up 21% to a 52 week high  after it announced progress on its research into “an inhalable therapeutic for COVID-19.  However, this is very early stage research. They only now hope to soon begin Phase I and Phase II trials – but they do expect that this could move quickly. In any case this is a step forward. Ceapro has several research irons in the fire.

TFI International was up another 4.1%.

Our report on Melcor Developments is updated and rated Speculative Buy at $7.25. Q2 earnings and cashflows were better than I would have expected. The company seems pleased. But the comp[any is also being cautious in conserving cash and cutting expenses. This has been a disappointing investment for quite a few years. It now trades at just 22% of book value. It would seem that either its assets are greatly over-valued on the books or the market is pricing the shares far too low or some combination of the two. Part of the problem is an exceedingly thin trading volume and lack of interest from analysts.

It has been in the news that “Warren Buffett” bough about $600 million shares in Barrick Gold reversing his previous disdain for Gold as a long-term investment. At $600 million it is perhaps most likely that Buffett himself made this investment decision for Berkshire. But it is also possible that it was one of his two portfolio managers who made this decision. They act independently. If Berkshire / Buffett wanted gold itself as an investment they would have done that. They may simply see Barrick as an under-valued company. But I would agree that this has to be seen as some kind of show of faith in gold since Barrick’s value depends on the price of gold to a good extent.

It has crossed my own mind lately that perhaps a modest investment in gold would not be such a bad idea. given all the money printing that is going on.

On Monday, the S&P 500 was up 0.3% while Toronto was up 0.9%.

Toll Brothers was up 6.1% to $42.15 as U.S. home builder sentiment was reported to be very strong.

Going the other way, AutoCanada gave back 7.9%. This comes after its recent sharp increases.

Boston Pizza Royalty was down 7.1% reversing most of its gain of last week.

The report for the Melcor REIT is updated and rated Buy at $3.95 . The REIT had a relatively strong Q2 considering the virus situation. There has been insider buying. The CEO seemed quite upbeat on the conference call. On the other hand it seems sure to report poor adjusted earnings in Q3 as it will be “eating” 25% of the rent for small business tenants that qualify for  a federal rent relief program. It did not recognize any expense for this in Q2 even though it expects to forego $500,000 in respect of Q2. Overall the 9% distribution appears to be sustainable and could increase moderately.

Its rental buildings are marked to market and it suffered a 7% decline in building values this Q2 due to market conditions. Interesting, market value does NOT mean what the building could be sold for right now. It is more what the buildings SHOULD sell for based on various model assumptions. The mark to market does not consider fire sale prices. Still with the equity in the buildings trading at 43% of book value, the units do appear to be under-priced in the market.

The REIT has been conserving cash by deferring mortgage and even utility and property tax payments where possible. It is a bit sobering to see a publicly traded entity so thin on cash that it feels the need to defer utilities and property taxes. In large part this may be due to the tax legislation that allows REITs to escape income taxes as long as they distribute out and do not retain virtually any of their taxable income. In addition keeping cash in the bank would lower its ROE. An upside of this is that the REIT may NEED to partially restore its former distribution level in order to remain tax-free.

Friday was a relatively quiet day in the markets with the S&P 500 about unchanged and Toronto down 0.1%.

Boston Pizza Royalties Income Fund was up 10.3% after reporting (obviously very weak) Q2 results and indicating it will reinstate some level of cash distribution near the end of this year.

I will have some updated reports this week. 

Markets were modestly lower on Thursday as the S&P 500 fell 0.2% and Toronto fell 0.3%.

CRH Medical bounced up 9.2%. 

AutoCanada was up 7.1% and has certainly had an impressive recovery from its lows.

Greetings from Waterton National Park Alberta.

On Wednesday, markets continued to push higher as the S&P 500 rose 1.4% and Toronto rose 0.5%.

AutoCanada was up a further 8.0% on its Q2 earnings release.

Apple was up another 3.3%.

Checking the latest rail car loading report out today,  the recovery continues in the U.S but the level remains noticeably lower than the past two years. Metallic ores and minerals are a big laggard.  Another laggard is non-metallic minerals as is coal.

Similar comments apply to Canada but in addition petroleum car loads are substantially lower.

On Tuesday the S&P 500 was down 0.8% and Toronto was down 0.65%. 

AutoCanada was up 7.3%. That suggests maybe a leak of information since it reported results after the close that appear to be good results given the virus situation.  There has been a strong recovery in the stock. I am continuing to hold my shares.

I took a close read of the Q2 results of the Melcor REIT today. Given the circumstances the REIT did well in Q2 but does face uncertainty. One item that grabbed my attention is that they need to continue to payout substantially all of their taxable income in in order to maintain their tax-free status. They did not discuss what their taxable income is. But given the 47% reduction to their distribution they may need to push the distribution back up. In any case the units continue to trade well below book value.

The parent, Melcor Developments reported Q2 results after the close today. These results appear to be relatively good in the circumstances. Their shares also trade substantially below book value. 

On Monday, the S&P 500 was up 0.3% and Toronto was up 0.4%.

FedEx surged 9.0%. Apparently at least partly due to an analyst upgrade. 

Canadian Western Bank was up 5.2% probably linked to higher oil prices.

Toll Brothers was up 3.2%.

Overall, it was a good day for most investors. Shopify did bounce down 4.6% giving back a little of its recent enormous gains.

On Friday the S&P 500 was up 0.1% while Toronto was down 0.2%.

I am certainly surprised at how strong the markets have been. low interest rates are  a key driver as is expectations for a virus vaccine.

I’m surprised that some of Trump’s actions have not frightened markets. If he has his way the U.S. will continue to turn inward and the free trade policies that have been a key to massive increases in the standard of living ALL over the world for most of the past 200 years or more will start to be reversed or at least further gains will be slowed. I don’t see that as a good thing for markets ultimately nor for Americans or most of the world’s people. 

Bill Gates was on Fareed Zakaria’s show this morning.  Fareed’s show is on CNN but is free of most of the incredible and tiresome anti-Trump bias of the vast majority of CNN’s offerings. Listening to Bill Gates I was once again struck by his calm intellect. I wonder if he has ever considered running for President. I think he would make a fantastic President.

Meanwhile I will get back to some updates soon since most of the Q2 reports have now come in. 

Markets were higher once again on Thursday with the S&P 500 up 0.6% and Toronto up 0.5%.

Canadian Tire was down 6.3% after reporting a loss in Q2 . Its sports stores were closed for much of the quarter and the Canadian Tire stores had limited operations. Still, sales were up 9.3% year over year for the Canadian Tire stores. 

Apple was up 3.5%.

Linamar reported Q2 after the close and the headlines says sales down over 50%. Apparently though the loss was less than analysts expected. 

The Melcor REIT reported after the close with what I would consider good cashflows. They did take a write-down of 7% on fair value of properties which is no shock given the Alberta economy. If the price drops due the GAAP loss, it might be a buying opportunity. 

Markets were once again higher on Wednesday. The S&P 500 was up 0.6% and Toronto gained 0.8%.

Some of the gainers included lulu lemon – up 3.7%,  Canadian tire up 3.3%,  Linamar up 4.9%.

After the close, Stantec, WSP and Andrew Peller reported earnings that the headlines describe as positive.

And Costco reported another month of blow-out same-store sales gains – up 15.8% this July versus July last year and with e-commerce up 76%. 

On Tuesday, the S&P 500 was up 0.4%. Toronto which was playing catch-up, due to the holiday yesterday was up 1.2%.

Costco was up 3.2% 

I mentioned Ceapro in my last post. I bought some  in a family member’s account that I manage. It was down 2.9% to 68 cents despite its press release this morning that I mentioned.

I got an interesting email from a local business.

“Evolution Golf Sherwood Park will be closed for the month of August due to a shortage of staffing. The hours at the North and South locations will remain unchanged.”  (This is an indoor golf simulator facility.)

Okay a shortage of staff when the unemployment rate in Edmonton and Alberta (Sherwood Park is an Edmonton suburb) is at a high not seen in decades. Presumably this is due to the Canada Emergency Response (CERB )benefit of $2000 per month. By necessity that program was never nuanced enough to reflect that some people were only working part-time. Many part-time workers would lose money if they went back to work. Clearly, the SERB benefit needs to be at least nuanced if not tapered away before long.

In other news this morning HSBC Canada (which is a bank) reported a 95% drop in profit due to loan loss provisions. This may be contributing to CWB being down 3% to $22.11 this morning. CWB will likely come out the other side of this and continue to grow. But meanwhile no one really knows how bad the loan losses can get.

Ceapro (our one penny stock on the list) has announced publication in a scientific journal of positive benefits from their propriety formulation that treats “exercise-induced inflammation”. This is positive but is far from the stage where they have a product that they can actually start advertising to the athletes of the world. It’s progress but revenues from this are far from imminent unless they were to do a licencing or partnership deal and get upfront money which may be possible. Perhaps it is very interesting and promising that “the study was co-funded by Ceapro and Pepsi co”.

Canadian markets were closed on Monday but the S&P 500 was up another 0.7%. 

Shopify was up 5.8%. 

The owner of the massive 7-11 chain of stores made a huge U.S. $21 billion deal to buy some 3,900 gas stations from Marathon Petroleum. The headline on the story indicates that Couche-Tard was “beaten out” in the deal.  However it may only be speculation that Couche-Tard made a run for this deal. Couche-Tard does not overpay. Sometimes being “beaten out ” in an auction type situation could be a good thing.

It’s Monday but the Canadian stock markets are closed for the civic holiday while the U.S. markets are open.

On Friday Toronto was down 0.8%. Losers included Canadian Western Bank down 2.8% to $22.80. Shopify bounced down 3.1%. RioCan was down 2.7% and Linamar was down 3.9%.   In The U.S, the S&P 500 was up 0.7% on Friday.

This Monday morning, the S&P 500 is up 0.6% and the headlines credit this to hoped for added economic stimulus. This includes Apple – up another 3.5%. And Shopify which is bouncing back in U.S. trading, up 4.4%.

So, we have U.S. markets continuing to rise ever higher for reasons that would include record low interest rates that make alternatives to equities less attractive, hopes for a vaccine and hopes for more massive government stimulus of the economy.

Risks that the market seems to be ignoring include potential re-lockdowns, failure of vaccines to be effective and continued lower economic activity. Also a Biden presidency is generally considered bad for the markets but the markets seem to be ignoring that. There is talk of Trump delaying the election over the protests of the democrats. There is talk of Trump declaring the election invalid, due to problems with mail-in ballots, if he loses.  These would seem to be real risks some of which could be very bad for markets (not to mention democracy!)  if they occurred. Therefore it would seem prudent to review our exposures to equities and not be caught with too much in equities and too little in cash or safe investments in the event  of a big decline. Everyone’s situation is different and some may have both the emotional tolerance and the financial capacity to take the risk of being 100% invested in equities. But everyone should consider whether they have too much or too little exposure to equities at this point. 

On Thursday, the S&P 500 was down 0.4% while Toronto was about unchanged.

Intact Financial was up 2.6%. Constellation Software was up (another) 3.4%. 

Apple and Amazon had better than expected earning reports. 

RIWI was up 12% to $3.59 and has moved up a notch to the Venture Exchange from the Canadian Securities Exchange. This company remains a good speculative pick.

Wednesday was a strong day in the markets as the S&P 500 rose 1.2% and Toronto 1.1%.

Intact Financial was up 3.0% after it released strong Q2 earning.

Shopify surged another 7.0%.

TFI International was up another 3.0%.

Linamar was up 3.4%.

Starbucks was up 3.7%.

Aurora Cannabis was down 8.9%.

I have updated the report for Aecon Group and consider it to be a (lower) Sell at $14.31 That was a price from yesterday. It closed today at $14.50.

Basically it could be held on the theory that it will benefit from government infrastructure spending and generally get back on track as the virus situation hopefully recedes. Also it is cheap in relation to book value. But fundamentally it has been a poor return business. Amazingly, the founder who was CEO for over 50 years and still seats on the Board does not bother to own a single common share! (He does own substantial restricted share units) Earnings seem set to decline further for the rest of 2020 compared to Q3 and Q4 of 2019. Also its dividend while quite attractive at 4.5% is now high in relation to earnings. The company would be reluctant to cut the dividend but it seems a possibility.

I am glad this company exists. It builds crucial infrastructure and does so efficiently. But it just does not seem to be a sufficient money maker. Again, it could be held but there are probably better places to invest.

Markets were down modestly on Tuesday as the S&P 500 fell 0.65% and Toronto was down 0.25%.

TFI International was up 2.35% on its earnings release.

RIWI a very small company that was recently added to our list posted a good strong earnings report after the close. 

Visa reported lower than expected revenues.

The Financial Post reported today that the regulators are thinking of extending the mortgage deferral program. This gets a little ridiculous at some point. The banks are marking these mortgages as current and not delinquent despite extended payment holidays. This is called extend and pretend. Maybe it makes sense if almost everyone gets their jobs back soon. If not… it could get nasty in terms of mortgage delinquencies once the deferrals end.

The federal goverment is adding about $300 billion to the deficit by borrowing money. The Bank of Canada is going to simply print money to buy back about $260 billion in government debt over a one year period ($5 billion per week they said). What could go wrong? If the alternative to this is we would have had a depression and deflation perhaps it was the best move. But surely there will be negative consequences at some point.

Monday was another positive day in the markets. The S&P 500 was up 0.7% and Toronto was up 1.0%.

Some of the larger gains included Shopify – up 4.7%, Toll Brothers – up 3.8%, AutoCanada up 3.5%.

With the huge gains on so many stocks since the March lows, any investors who have too high an allocation to equities (and too high varies hugely by personal circumstances) should probbaly take the opportunity to sell some equities and move a portion into cash or other fixed income type assets.

After the close, TFI Internation reported Q2 earnings that were down modestly but may be considered good in light of the virus situation.  The stock has been up a lot and so the market action tomorrow will indicate whether the results met expectations.

I am working on an update for the constuction company Aecon Group. Unfortunately it appears to be fundamentally a low return business. Last year was its best ROE in about six years and that was only 9%. And now this year is looking to be possibly down near breakeven or certainly a decline. I applaud the existence of this company and the great work it does. But it does not look like a particularly good or promising investment. At best I would hold a modest position for diversification. It also has complex accounting due to a large amount of work being done through joint ventures. For an example of the complexity it shows a total of $599 million in cash on the balance sheet. But then it explains that after deducting a large amount of cash in joint ventures and some reserved cash it only has $30 million of available cash at the parent level. I am not suggesting it is in any danger at all that way. But this $30 million is vastly less than the $599 million one might picture based on the balance sheet.

Aecon also effectively paid for a huge airport redevelopment project in Bermuda in return for operating the airport and getting the profits for the next 30 years. Normally that would be almost a guaranteed cash stream. Now it faces probably very little if any profit there this year and maybe several years before things get back to normal in air travel. Not their fault. But a big whoops. On the plus side their backlog of projects is at a record level.

Markets were lower on Friday as the S&P 500 was down 0.6% and Toronto was down 0.1%.

AutoCanada was up 2.6%. 

The Melcor REIT was down 9.1% to $3.50. 

Looking at AECON Group’s Q2 report there was an interesting aspect regard the 75% federal wage subsidy. They are applying for it but do not yet have an estimate of what they will get. Whatever they are elegible for in Q2 would be added to Q3 income. This could be a huge benefit to some companies. 

The U.S. government is now debating extensions to certain wage subsidies . The outcome of this could be a driver for the market direction this week. The market will want more stimulus and a continuation of support for the unemployed.

On Thursday, the S&P 500 was down 1.2% and Toronto was down 0.9%.

AutoCanada had a atrong day rising 17%. Presumably there was an analyst upgrade. I did not see any news. 

Aecon Inc. reported after the clsoe a Q2 loss but emphasized their record backlog. I will take a closer look at this report. They have a substantial long-term operational contract at the Bermuda International Airport. That part of their business will be far slower for some time. 

On Tuesday, the S&P 500 gained 0.2% while Toronto was down 0.1%.

Shopify bounced down 6.4%.

Energy stocks were generally higher and the Energy ETF XEG was up 8.9%.

After the close, CN Rail reported Q1 earnings that were down but which beat expectations . Adjusted earnings per share were down 26% which is not bad considering that revenues were down 19% and that much of the costs are fixed.

On Wednesday, the S&P 500 was up 0.6% while Toronto was about unchanged.

Linamar was up 5.0% to $40.81. Toll Brothers was up 6.9% to $36.69 and AutoCanada was up 3.9%.

Ceapro slipped back 5.6% to 67 cents.

The latest rail car loading statistics were out. In the U.S. the latest week does show evidence that traffic is moving higher. But it still remains well below last year’s level. Motor vehicles and parts has recovered to last year’s level. Grain shipments were up sharply compared to the prior week. Intermodal, which is consumer goods, moved higher and is approaching last year’s level. The picture in Canada was relatively similar.

Stocks were mostly higher on Monday as the S&P 500 rose 0.8% and Toronto 0.4%.

Amazon soared another 7.9%. That is a HUGE amount of wealth creation. About U.S. $120 billion in new added wealth based on investors bidding up the price in a single day. It’s incredible to think of. Amazon is set to report earnings. The market will focus on the revenue gain as oppoed to the earnings level.

Similarly Shopify was up 8.5%.

Markets were positive once again on Friday as the S&P 500 rose 0.3% and Toronto gained 0.6%.

Couche-Tard was up 2.2% and sits at a recoird high. 

Ceapro was up 7.7%. But that’s not such a big move for a volatile penny stock. 

This week will feature lots of Q2 earnings reports. We will start to see exactly how the virus had affected various companies.

Markets were down a little on Thursday as the S&P 500 declined 0.3% and Toronto ws down 0.2%.

Penny stock Ceapro was up 14% to 65 cents. There was no news to explain this and so we should not read too much into it.

Toll Brothers was up 4.0%.

Most rate reset preferred shares rose today. The down-side of rate resets is that with interest rates remaining lower for the foreseeable future they will reset at low yields. But if the going market yield is so low then that should make even a 3 or 4% rate reset yield more attractive. It would be terrible to be stuck with a 3.5% yield in a world where the going rate was 6%. But not so terrible in a world where the going rate on bonds is at today’s (and apparently tomorrow’s) very low levels.

I have added a new company to the list of stocks on the subcriber home page. RIWI corporation is very tiny and sutitable for only a small speculative investment. But it does have good potential. I am rating it Specualtive Buy at my analysis price of $2.95. It closed today at $3.00. The analysis is in U.S. dollars because they report in U.S. dollars. This company was discussed very favorably in April 2019 on this web site by my associate Zach Trease Zach confirms that he continues to be a strong believer in this company.

Markets were higher once again on Wednesday as the S&P 500 rose 0.9% and Toronto ws up 1.0%.

Restauant Brands was up 3.9%. AutoCanada was up 8.6%, CRH Medical was up 5.7%.

Penny stock Ceapro jumped 11.7% to a new 52 week high of 57 cents but remains well down from its historic high.

After the close, the Melcor REIT announced its unchanged monthly distribution of 3 cents and revealed that its rent collection for July was 78% which is the same as June. May was 80%. Therfore they appear to have stabilized around 78%. They are applying for the government commercial rent relief program on behalf of tenants. Presumably success in that department will result in some additional rent being collected even though under that program Meclor will receive only 75% of the contractual rent (which is much better than the 0% it is has likely received from some of these tenants but also lower than the 100% it may have received from some of them).

The latest rail car statistics are out today. The picture continues to show total rail traffic well below the level in the corresponding week last year. Motor vechicle and parts continue to be an exception and have returned to about last year’s level.

Tuesday markets ignored the virus situation as the S&P 500 went up 1.3%, the Dow Jones Industrial Average was up 2.1% and Toronto was up 1.7%. I can’t help but wonder if investors are “whgistling past the graveyard” in ignoring the virus situation in the U.S.

Some of the larger gains were: Toll Brothers up 4.7% and Berkshire Hathatway up 3.0%.

Wells Fargo cut its dividend by 80% after reporting a large loss due to loan loss provisions. The concensus thinking in Canada is that the big banks here will NEVER cut their dividends. But in investing as in life one should never say never. It may be unlikely that the Canadian banks will need to cut their dividends, but it is not completely out of the question. It’s always been my belief that bank management and bank regulators have basically a sacred duty to protect depositors. Impacts on investors and on the economy should take a back seat if banks need to preserve capital in order to protect depositors. After all, investors signed up for risks, depositors did not.

Markets were initially higher on Monday but went lower late in the trading day and the S&P 500 ended the day down 0.9% while Toronto ended the day down 0.5%. The late-day decline was blamed on the virus situation and the reversal of some of the economic openings. 

Among the decliners: Shopify was down 6.2%, Toll Brothers was down 5.1%, and AutoCananda was down 5.4%. 

Moving the other way, TFI International was up 3.2%. Stantec was up 2.5% and the Melcor REIT was up 4.8%.

U.S. companies will begin reporting Q2 earnings this week. Canadian companies tend to report somewhat later with many four to six weeks or more after the end of each quarter.  However, when the Canadian companies report they do so with a full management discussion and analysis as well as financial statements along with a press release. In the U.S. we usually see a presss release quite early but the full financials statments and report comes later. I prefer the Canadian system. A few Canadian companies including CN Rail manage to get a full report out very early within about three weeks from the end of each quarter. 

Markets had another strong day on Friday with the S&P 500 up 1.05% and Toronto up 0.9%.

Toll Brothers bounced up 4.7% but this comes after a 4.8% loss on Thursday.

Berkshire Hathaway was up 2.3% and this was likely because of a report that it appears that they appear to have been buying back stock lately. Berkshire has not yet reported buying back shares recently but the number of shares indicated in a recent filing was down. 

Last Wednesday’s rail car loading report for the U.S. continues to show improvement. Traffic was down on the week due to the July 4th holiday. But that happens every year and U.S. intermodal traffic in 2020 was higher than the corresponding 2019 figure for the first stime since mid February. But with the holiday falling on a Saturday that may have meant a lower than usual holiday dip. It will take another week or two of data to confirm if U.S. intermodal traffic is actually now above the 2019 level (which seems doubtful). Motor vechicle and parts were also above the corresponding week in 2019 and also above the similar 2018 level.

In Canada, rail traffic overall is still well below the corresponding 2019 level. But for motor vechicles and parts the level was slightly above the 2019 and 2018 level. This again bodes well for Linamar and AutoCanada.

As of Sunday evening, CNBC reports that stock futures are up as investors shake off the continued spike in COVID-19 cases.

Stock indexes were down modestly on Thursday as the S&P 500 fell 0.6% and Toroto was down 0.4%.

Couche-Tard was up 3.9%. Amazon rose another 3.3%.

Costco was up 2.9% after announcing strong June sales.

Toll Brothers was down 4.8%.

On Wednesday, the S&P 500 was up 0.8% and Toronto was up 0.2%.

Toll Brothers was up 5.1%. Constellation Software was up 3.6%.

Yesterday I mentioned the convertible debenture that Cineplex was offering. The reason the exact interest rate and conversion price were not known is that this was not a “bought deal”. Usually, the big banks effectively guarantee to buy any shares (debentures in this case) that they can’t sell. But usually they can easily sell the full amount. In this case the big banks must not have been sure they could sell all these debentures therefore they simply tried to sell it toretail investors but nid not guarantee a price in a “bought deal”. The interest rate was dependent on how much demaind there was for the debentures. It took a day and hald to sell out. Most new issues sell out in an hour or two. Due to the lack of demand the final interest rate came in at the high end of the expected range at 5.75%. And the conversion price came in fairly low at $10.94. That compares to Cineplex’s share price of $8.58. This debenture may end up being a good investment since as long as Cineplex survives it will pay 5.75%. And if Cineplex returns to more normal revenues and/or collects a big payouit from Cineworld then the conversion option would provide a good capital gain.

Markets were down somewhat on Tuesday as the S&P 500 fell 1.1% and the Toronto stock index fell 0.5%.

Canadian Western Bank was down 3.0%. Possibly this was due to bad news on the pipeline front as courts are at least temporarily blocking the construction of Keystone XL in the U.S.

The report on Alimentation Couche-Tard is updated and rated (higher) Buy at $43.34. I have long rated this as an excellent company. I thought it would suffer a lot during the pandemic. Instead, last week it reported that its Q4 (ended April 26) proits per share had soared 82%! That was largely due to extraordinarily high margins on gasoline in the U.S. as crude prices fell but gasoline sellers apparently did not compete to push prices down which (contrary to popular opinion) is usually the case. Gasoline/fuel volumes were down 18% in the U.S. and 24% in Canada. But their in-store sales were only modestly lower during the pandemic. I had thought that the reduced gasoline fillups would push in-store sales way down. It may be that tobacco and alcohol sales (Alcohol in the U.S.) kept the customers coming in. I expect gsaoline margins to return to more normal (lower) levels  and so Couche-Tard may report lower profits in the next few quarters. But it remains an excellent company for the long term.

Cineplex is out with a convertible debenture offer that looks very strange. On the one hand it could be a reasonably safe way to play the potential upside if Cineplex wins its massive legal settlement with Cineworld or if Cineplex recovers greatly as the economy opens and the virus eventually goes away.

But a couple of strange things. The coupon on the convertible bond is estimated at 5.25% to 5.75% but could be higher or lower than that range (I imagine based on demand for the debenture). The conversion price is not yet known! On that basis I am not a buyer as I don’t like the unknown terms.

Cineplex is suing Cineworld for roughly $2 billion after Cineworld walked away from a contract to acquire Cineplex. It looks to me like Cineplex has a good case and could probably win in court. But I doubt that Cineworld could afford to make the payment and might then be forced into bankruptcy. So, Cineworld will fight this extremely vigorously and perhaps the most likely outcome is a far more modest cash settlement and even that could take years. A quick look at Cineworld’s balance sheet shows in US. dollars $12.5 billion in assets, $3 billion in equity but also $5.5 billion in goodwill that would be of highly questionable value given the virus situation and $3.6 billion in debt. On that basis I am skeptical that Cineworld could afford anything close to the Canadian $2 billion that Cineplex may well win in court.

I have not analysed it but my impression is that Cineplex has been very well managed over the years. It will likely survive. But it is facing a very bad situation for the next while. Its shares and this convertible debt have to be treated as quite speculative. They could payoff nicely but they are risky. 

Markets were strong once again on Monday as the S&P 500 was up 1.6% and Torontow as up 0.5%.

Amazon was up 5.8% which is rather astounding for such a huge company.

Toll Brothers was up 3.4%.

Shopify had a rare down day and fell 3.8%.

AutoCananda was up 4.6%.

As of Sunday evening, U.S. stock futures suggest that Monday will be another positive day for stocks. That despite the virus situation.

On Friday, the S&P 500 was up 0.5% while Toronto was down 0.2%.

CRH Medical was up 9%.

Over the weekend Berkshire Hathaway’s Energy subsidiary announced it will acquire Dominion Energy’s Gas Transmission and Storage business. Apparently the deal is worth about $10 billion. Interestingly the press release was on Berkshire Hathaway Energy and not on the main Berkshire Hathaway site. It seems that $10 billion is not all that material to Berkshire Hathaway at the parent level. The assets to be acquired include a 25% share in one of only six LNG export / import plants in the U.S. Buffett, age 89, was quoted in the press release. He apparently does not take weekends off when there is a big deal in the works. 

Markets continued to move higher on Thursday with the S&P 500 up 0.45% and Toronto up 0.7%.

Shopify romped up another 8.4% as enthusiam for this company seems to know no bounds.

TFI International was up 2.4% and is at an all-time high.

Linamar was up 4.1%.

Canadian auto sales for June and been reported. They were down 16% verus June of 2019. But that is a huge recovery versus this March and April. It bodes well for AutoCanada and for the auto parts companies including Linamar.

Rail car traffic last week continues to show a relatively muted recovery. Vechicles and parts however continue to show a huge rebound.

Markets were higher on Tuesday as the S&P 500 rose 1.5% and Toronto 0.8%.

lululemon was up 6.0% on news of an acquisition it will make.

FedEx was up 4.2% and then rose a further 9.1% in after hours trading after it released earnings.

Toll Brothers was up 3.8%.

TFI International was up 3.6%.

The Toronto Stock Excahnge will not trade on Wednesday due to the Canada Day holiday.

On Friday, the S&P 500 was down a hefty 2.4% and Toronto was down 1.7%.

A few stocks on our list managed to buck the trend. TFI Interenational was up 1.1%. AutoCanada was up 1.0% and Stantec was up 1.2%.

Futures were reportedly down earlier this eveing but are up moderately as of 9:30 pm eastern time.

The virus situation in the U.S. poses a risk to markets. The market seems to be pricing in a sharp receovery in economic activity. But now, a number of States may have to reimpose economic lockdowns.

On Thursday, stocks moved higher near the close and the S&P 500 ended the day up 1.1% while Toronto was up 1.0%.

U.S. bank stocks were strong as certain regulations were loosened. But then after the close the FED expressed concern and moved to restrict (cap) some bank dividends.

CRH Medical was down 5.1%. Possibly the market is concerned that the virus situation will keep people away from colonoscopy clinics. 

Park Lawn Corporation has a new issue out – a five year debenture (the word debenture signifies a bond that is not secured by assets) that pays 5.75% annually and matures December 31, 2025.

As of 12:30 pm eastern time the issue was still “open” for purchase at TD Direct.

It may be closed by the time you read this but nevertheless the terms of the offer may be of interest so that you can consider this type of investment for the future. If you are interested in individual bond / debenture issues then be sure to register with your broker to receive alerts as they tend to sell out quickly. With these issues you unfortunately typically have to act fast with little time to analyse the company.

Some observations:

5.75% is an attractive yield in today’s world. But it does signify somewhat higher risk.

I am not familiar with Park Lawn’s financials or credit rating. Ideally, I would want to gain some familiarity before investing.

The fact that the issue is still “open” after several hours  may signify that investors see it as risky or unattractive. Or, perhaps this is simply becasue Park Lawn is a relatively smaller company. Bond investors do tend to be fairly risk adverse. Bonds basically never mature at MORE than the the face value and therefore it is important that the risk of not getting your money back be seen as quite small.

This debenture is NOT convertible into shares. And that means it will NOT trade on the stock exchange which many convertible debentures do. Selling this investment before maturity would mean a wide bid / ask spread or you may find it difficult or impossible to sell. Therefore, buy this type of debenture only if you are absolutely prepared to hold until maturity.

The company also has the right to redeem the debenture upon maturity with shares worrth 105% of the debenture investment rather than cash. I imagine the only reason they would do that is if they were in some kind of financial difficulty at that time and so you might find that shares supposedly worth 105% are worth something under 100% by the time you sell. All-in-all, this is an unattractive feature of the debenture. I have seen this feature in convertible debentures as well but I don’t know how common it is.

The company can redeem the debentures two years early by paying a small premium of 2.875% and can redeem one year early at nop premium. That’s probably unlikely and in any case you get your money back with interest and I don’t see this as much of a concern at all.

Interest on bond/debentured is taxed at full marginal tax rates and so this investment would be better for an RRSP / RIF or TFSA as opposed to a taxable account.

Overall, this type of investment may be of interest as part of a portfolio especially to those with cash that they would like to earn reasonable interest on.

P.S. As of 2:20 pm eastern time the offer is sjown as closed at TD Direct. Therefore it seems the issue was reasonably well received by investors but did take over half a day to sell out. Sometimes new issues sell out almost immediately.

On Wednesday, the S&P 500 fell 2.6% and Toronto fell 1.7%.

The great majority of stocks on our list were down.

Markets seem to have started to take notice of the higher virus cases in much of the U.S.

Penny stock Ceapro had reached a 52 week high of 56 cents earlier today but ended the day down 6.6% to 49.5 cents. This stock will likely continue to be volatile. But it could easily double and more if some of its research efforts start to pay off in licensing deals.

The latest rail car shipping statistics were released today. In both the U.S. and Canada, the traffic trend continues upward but remains noticeably below the level of the prior two years. Motor vechicles and parts continue to show a huge recovery but remain below the level of the prior two years. Overall, the data does not show that strong of a recovery yet.

On Tuesday, the S&P 500 was up 0.4% and Toronto was up 0.3%.

A notable gainer was AutoCanada – up 11.9% 

Boston Pizza did not react to the news I mentioned yesterday. Probably becasue it was still very unclear what the duistribution might be once it is restored and what it might be at in a year from now. That depends how many Boston Pizza restaurants might close (if any, but I expect some will close) and what the sales level will be at in the coming months and years for those that remain.

After the close, Aurora Cannabis announced 700 layoffs and that it is closing 5 sites. This seems to be a company in big trouble. They say the latest moves position Aurora for long term success. That may be. Or these may be moves of desperation. This was a company that expanded far too quickly and wasted money in doing do.

Regarding Alcanna: I was interested in it because it used to be on our list for several years and its price had recovered quite a bit in May (but then fell back somewhat after June 8th). Also their sales have been strong during the pandemic. And apparently Cannabis sales are strong during the pandemic also. After looking at its financials it is too early to recommend it (if ever). It has had a long string of losses dating back years now. It is however under new management. It could be considered as a speculative pick. I may add it to the site if it manages to report a profit in Q2. 

On Monday, the S&P 500 was up 0.65% and Toronto was up 0.3%.

Boston Pizza provided an update after the close but it was not clear what the cash distribution will be after it is re-started. Most of the information was about the parent Boston Pizza International. It appears that BPI needed money and its owner Jim Treliving is going to inject $10 million. And BPI has accessed bank borrowing. 

I am taking a look at Alcanna Inc. It’s definitively a speculative stock. It has a poor history but is under new and seemingly better management and is benefiting from increased alcohol sales as bars and restaurants were closed and are now operating at limited capacity.

After the close, stock futures fell on reports that the hoped for U.S. / China trade deal was off but then recovered when the White House denied that report.

The new Bank of Canada governor today explained that the Bank bank is buying government of Canada bonds from short term to long term and thereby lowering all interest rates. This is quantitative easing. He said this was initially started a couple months ago to prevent credit markets were in danger of freezing up. Now it continues and is stimulative. He also mentioned that the real interest rate (after deducting expected inflation) is negative across the spectrum from short term to long term. We can only wonder where all of this will end as central banks manipuate interest rates lower. We live in a world where the government can borrow at negative real rates. No wonder they keep doing so massively.  And if rates stay low, the government will have no reason to ever pay off that debt. Strange days indeed…

On Friday, the S&P 500 was down 0.6% while Toronto was about unchanged.

On Sunday evening, stock futures are down about 0.6%. Virus cases continue to rise in the U.S. but so far the stock market is not expecting this to lead to a reversal of the reopenings. If there were such a reversal in several or more States then it seems safe to assume that the market would react negatively.

Another possible concern for the market is Donald Trump’s vulnerability to an election defeat. I am not placing any bets on that as Trump certainly surprised most analysts with his 2016 victory. 

Markets were not much changed on Thursday with the S&P 500 up 0.1% and Toronto up 0.3%.

Shopify had another strong day rising 5.9%.

I added some updated comments in the stock table on the Subscriber home page. For the preferrred shares I added the amount that each is paying out. Rate reset preferred shares have continued to dissapoint as interest rates have, for many years) continued to return to new lows each time they appeared to be on the rise. The table includes one perpetual preferred which will do well if interest rates stay very low. If holding preferred shares it might be wise to have a mix of perpetuals and rate resets.

Stocks were mostly down on Wednesday as the S&P 500 fell 0.4% and Toronto fell 0.65%.

The increased virus cases in the southern U.S. could cause the market to cool its enthusiasm.

I’m going to take a look at Alcanna, symbol CLIQ,  which owns liquor stores in Alberta and also owns some cannabius stores. Liquor sales to consumers have increased during the pandemic. And the stock has shown somw life recently.

The latest rail car loading reports were released today and may provide some indication of the economy is reopening.

In the both Canada and the U.S. rail car traffic was noticeably up verus the prior week but remains well below 2019 and 2018 levels. Motor vechicles and parts is continuing to show a dramatic recovery – not back to the old levels but surging higher for the past five weeks. This should bode well for auto-related stocks.

Stocks rose on Tuesday as the FED indicated that interest rates will stay low and in continued reaction to strong retail sales gains in May and perhaps due to positive news regarding COVID-19 treeatments.

Ceapro was up 10%, Heineken was up 3.5%.

Markets were initally down noticeably on Monday but ended the day with the S&P 500 up 0.8% and Toronto up 0.7%.

A notable gainer was our one Penny Stock, Ceapro, up 25% after announcing progress in one of its research efforts. It has a number of irons in the fire and one or more of these could eventually send the stock significantly higher. But it is a speculative stock.

The Melcor REIT announced that it had received 70% of the June rent due. This was after receiving 75%for May and 83% for April. They will be applying for the federal rent subsidy program for those tenants that qualify. That would mean collecting 75% for those tenants and foregoing 25%. With the Alberta opening up, they may collect a higher percentage of rent in July.

On Friday, the S&P 500 was up 1.3% and Toronto was up 1.4%.

Boston Pizza Royalties recovered 12.0%.

Stock futures are down somewhat on Sunday evening.

Markets were down sharply on Thursday as the S&P 500 fell 5.9% and Toronto fell 4.1%.

This is not exactly shocking given the huge run up and given the unemployment levels. But optimism remains and the futures are higher this morning.

The report for Amazon is updated. The update used a price from Wednesday. Amazon always looks expensive based on earnings but its massive growth has made it a winner.  And those who bought and held in the past have certainly done well.

On Wednesday, the S&P 500 was down 0.5% and Toronto was down 0.8%.

Most stocks were down. Notable exceptions included: Couche-Tard – up 4.3%, Dollarama -up 2.5%, Apple – up 2.6%, Amazon – up 1.8% and lululemon up 2.6%.

Markets have of course risen a lot lately. They are pricing in a lot of optmisim about the economy reopening and the virus situation continuing to improve. Any bad news in those areas could send markets lower.

Markets are also expecting low interest rates to remain with us. And the FED today confirmed that they also expect rates to stay low possibly through 2022.

The latest rail car loading reports were out today. U.S. car loading did rebound upwards but that was mostly because the prior week had the Memorial Day holiday. But there is a modest upward trend in the graph. Car loads remain well below 2019 levels but are moving slowly higher. In Canada, the graph is not yet showing any sign of recovery but has at least bottomed out. Petroelum car loads continue to drop while intermodal (consumer goods) carlkoads are starting to climb somewhat. Motor vechicles and parts have turned up very sharply. That is also the case in the U.S. and is a very good sign.

Markets were down modestly on Tuesday with the S&P 500 down 0.8% and Toronto down 0.9%.

CRH Medical was down 6.9%, giving back some of its recent gains.

Apple was up 3.2% and is at an all-time high.

My next update will be for Amazon which will no-doubt continue to look expensive. But it has certainly been well-positioned for the economic shut-down.

Markets were highere once again on Monday with the S&P 500 up 1.2% and Toronto up 0.8%.

CRH Medical was up 22%.

Canadian Western Bank was up 6.1%.

RioCan was up 5.2% to $18.14. A week ago it was under $15.

Boston Pizza was up 17% to $9.94. That’s a strong recovery considering so many of the restaurants remain closed (providing take-out only), that they will go forward at 50% capacity for a while and we don’t know how many locations might permanently close.

CMHC released housing start data for May.

Single family home starts were down 17% in Alberta. They were up 3% in Ontario. And they surged 43% in Quebec. These home starts were likley committed to before COVID-19 took hold and so we probably can’t read too much into these figures. 

Markets were sharply higher on Friday in response to employment gains in May when the forecasts had predicted further job losses.

The S&P 500 was up 2.6% and Toronto was up 2.1%.

The great majority of stocks were up. 

Oil prices were sharply higher Sunday evening due to OPEC agreements. That should be good for the Candian stock market. At the same time, the market has been very strong and that can’t continue every day.

Wednesday was yet another positive day in the markets. The S&P 500 was up 1.4% and Toronto was up 1.2%.

Toll Brothers was up 9.2% and AutoCanada was up 11.4%.

Rail car loadings in the U.S. were down again last week but that was likely mostly due to the Memorial Day holiday. In any case they were down 19% compared to the same week last year. In Canada there was an increase versus the prior week which included Victoria Day. But the level remains well below that of the prior two years.

In my community, a suberb of Edmonton, more people are out shopping. Costco today was crowded. I stopped at a Tim Hortons and it was fairly busy. On seeing how busy Costco was, I added a few shares to my small position.

Tuesday was another positive day for stocks as the S&P 500 was up 0.8% and Toronto was up 1.0%.

Canadian Tire was up 5.4%.

Auto Canada was up 7.2%.

Canadian Western Bank was up 4.2%.

Our one penny stock, Ceapro, is updated and rated Speculative Buy at $0.40. It has a base business that generates cash flows but its potential value is in its sevral research efforts that could lead to licensing or commercial products. It has been quite a volatile stock.

Ignoring the riots, stocks were higher on Monday with the S&P 500 up 0.4% and Toronto up 0.3%.

Canadian Western Bank was up 4.0%.

Canadian Western Bank is updated and rated Speculative Buy at $23.59. It looks quite cheap. But the extent of loan losses it is facing is hard to guess (even for CWB management). It will probably turn out to be a very good investment but due to potential loan losses it is not without risk.

AutoCanada was up 3.6%.

The Canadian dollar at 73.8 cents U.S. has risen recently in spite of a lot of predictions that it was going to fall.

WSP Global is issuing shares indicating it is for potential future acquisitions. I wonder if it is also to take advantage of a fairly high stock price which has wheathered the pandemic better than most.

On Friday, the S&P 500 was up 0.5% while Toronto was down 0.5%.

lululemon was up 5.5% to reach a new high at $300. I’m certainly surprised at that given that some of its stores are still closed and given that unemployment levels. 

Canadian Western Bank was down 3.4% despite reporting better-than-expected earnings on Friday morning. This came on a day when Canandian bank stocks were generally down somewhat. Laurentian Bank after cutting its dividends. That threw a scare into other bank stocks. 

To me, any notion that the Canadian banks will simply never cut dividends seems silly. Yes, they will try to avoid it partly because the market would be so shocked. But banks are fundamentally highly leveraged. In banking a 9% equity ratio is considered high! Bad loans can potentially chew through equity quite quickly. Banking regulatiors should be highly focused on protecting depositors, not on protecting share prices. If bad loans were to get large enough to push equity levels down too far then the banks would have no choice but to raise equity through share sales and/or by reducuing didends. A dividend cut at the alrge banks may indeed remain quite likely. But it is certainly not impossible.

As for CWB, its loan losses were higher than recent levels but remained quite managemable. Like the other banks, CWB’s higher provision for credit losses related primarily to estimated future losses on loans that are not currrently late on their payments. If everything goes as CWB is expecting then its share price certainly looks low. But some aspects of CWB’s projections may prove to be optimistic. 

Markets ended the day moderatley lower with the S&P 500 down 0.2% and Toronto down 0.1%.

Penny stock Ceapro was up 44% after releasing Q1 earnings. 

CIBC and TD reported earnings today and, as expected, their earnings were sharply lower due to much higher loan loss provisions. At the end of the day, those provisions are a forecast and it’s far from clear what level of loan losses will actually occur. 

Canadian Western Bank reports early Friday morning. The provision for credit losses there is certainly hard to guess. As a smaller less diversified bank it is certainly possible that the loan losses will wipe out the earnings this quarter. Historically, their actual loan losses have been low and they are known as conservative lenders. But the pandemic, combined with recent ultr-low oil prices, brings them into uncharted waters. However, they may also have some good news in terms of their migration to a more advanced (and advantageous) method of calculating their risk-weighted equity.

Markets continued higher on Wednesday with the S&P 500 up 1.5% and Toronto up 0.8%.

Toll Brothers was up 9.5% to $33. Then, after the close it released earnings which at least one headline described as better than expected. But the market may be dissapointed by some aspects of the report such as the lower margin on home sales. The stock rose a further 8% in after ours trading which indicates the market was happy with the results. However, after hours trading does not always carry through to the next day after anlaysts get a chance to digest the results.

Canadian Western Bank was up 6.4%. But we don’t know yet how large its provision for credit losses will be in its upcoming report. Canadian Tire was up 4.0%.

Rail car loading reports for last week show a definite start of a recovery in the U.S.  For Canada however rail car loadings continued lower. Possibly that was partly due the Victoria day holiday last week. It may be that CN Rail and CP are not doing as well as the market likely expects.

U.S. markets were higher on Tuesday with the S&P 500 up 2.2% and Toronto up 0.5%.

The Bank of Nova Scotia reported lower earnings which however were better than expected. Loan loss provisions rose but not as much as feared. The Bank expensed higher provisions for “performing loans”. Normally credit loss provisions relate largely to non-performing loans which are those delinquent by several months. Now many thousands have been granted six month deferrals on their mortage payments. These loans are still considered “performing” and not delinquent but it must be recognised that some of these will lead to delinquencies.

Royal Bank was up 6.2% on this news and Canadian Western Bank was up 9.8%. CWB is largely a commercial lender and has no unsecured personal lending. But its commercial lending may be problematic given the economic shutdown exacerbated by low oil prices. In addition it has a franchise lending operation that lends to certain leading Hotel and Restaurant brands. This franchise division will no doubt experience notable delinquencies.

Toll Brothers was up 3.9% climbing back over $30.

Canandian Tire was up 7.5%.

U.S. banks were higher after positive comments by Jamie Dimon, CEO of J.P. Morgan Chace.

Investors who think the Canadian banks will continue to rise on their earnings this week could consider the financial ETF that trades as XFN. Click to see its fundamentals. It has a low P/E at 8.3 as of yesterday but of course that is based on trailing earnings and not the lower expected earnings of the current quarter.

On Monday, the TSX was up 1.1% while New York was closed for the Memorial day holiday.

Canadian Tire was up 3.8%. 

Oil prices continue to recover somewhat with West Texas now at $34.11

This week the Canadian Banks begin to release quarterly earnings. The amount that they will set aide for bad loans will be of great interest. Despite hgher bad loans the big banks are not expected to reduce their dividends. The banks may decide that it is too early to know how Covid-19 will affect their loan losses since it is not yet clear to what extent the economy will return to more normal employment levels. Given the government support to individuals, it may be the commerical and industrial sector that will be the bigger problem as far as bad loans.

On Thursday, the S&P 500 and Toronto were each down 0.8%.

Melcor Developments was up 6.5% after releasing its Q1 report.

The report on Shopify is updated and is rated Sell or reduce at Canandian $1121. I try to fathom how its price of 53 times sales can be justified. It is a tremendously successful company. Ultimately it should make a high profit on sales. But it seems to be pricing in tremendous growth in revenues as well as the achievement of high profit margins. It is true that a 40% growth rate can justify a lofty valuation – but the valuation here seems very hard to justify.

Markets were up on Wednesday as the S&P 500 rose 1.7% and Toronto rose 0.75%. 

After the close, Melcor Developments released Q1 earnings which were fairly good. But they reduced the dividend by a further 2 cents to 8 cents to preserve cash. They reported a large profit on a GAAP basis driven by the reduction in price of the REIT units. This is basically nonsense and illustrates the increasingly often meaningless nature of GAAP earnings under the mark-to-market approach that has been increasingly mandated over the years. This gain will almost certainly be partly reversed for Q2 since the REIT unit price has recovered somewhat. Funds from operation which is a better measure of income was up 6% and at 18 cents per share is certainly larger than the dividend.  

Book value, which is admittedly somewhat exaggerated due to the way the REIT units are treated is $34.88 per share. That compares to the the share price today at $6.57. 

There will be some larger loss of book value / market value due to declining rental income on rental buildings at some point this year. Still, a very large book value cushion will remain.

Melcor is well positioned to get throuigh the current difficult period.

On Tuesday, the S&P 500 was down 1.05% as yesterday’s excitement about the early results of a vacine trial died down. Toronto was up 1.7%.

Linamar was up 8.6%.

Melcor Developments will post Q1 earnings after the close. Given low expectations, perapjhs the results will be better than expected for Q1. But the outlook is what is probabaly more important. And hopefully they will not make a further reduction to the dividend. 

American stocks had a strong day with the S&P 500 rising 3.1% while Toronto was closed for the holiday.

West Texas Oil is at U.S. $32.74 which is better news for Alberta.

Toll Brothers was up 11.8%. Wells Fargo, American Express and Bank of America all had strong gains. Visa was up 4.3%.

Linamar is updated and rated Speculative Buy at $31.43. It looks very cheap trading at 49% of its book value. But its earnings are set to be sharply negative in this Q2 and quite possiblky below zero for 2020. That is expected to be followed by some recovery in 2021. But it will likely take several years or more to return to the profit levels of 2018. It has a strong balance sheet and is well managed and will survive to grow again. The stock could rise in the coming days as the U.S. auto industry is opening up production this week. A reasonable strategy might be to take a small position and continue to evaluate.

On Friday, the S&P 500 was up 0.4% and Toronto was up 0.9%.

On Sunday, West Texas oil was U.S. $30.65. Not great but still a welcome improvement for Alberta.

The Toronto stock excahbe will be closed tomorrow Monday for Victoria day while New York will be open for trading but will close for Memorial day on May 25th.

On Thursday, markets swung from negative to positive. The Dow was down over 400 points in the morning but closed up 377 points.

At the close, the S&P 500 was up 1.15% while Toronto was about unchanged.

Our report on CRH Medical is updated and rated Speculative Buy at U.S. $1.83 or Canadian $2.55. Based on trailing year cashflows and adjusted earnings it definitely looks cheap. But like most companies it will have a very poor Q2 due tot he shutdowns and then it is hard to say what level its buines will return to in Q3 and Q4.

After the close, the Melcor REIT reported strong Q1 results. But of course, what matters more is how it is doing in Q2 and what the outlook is. They collected only 79% of the rent due in April and 71% of the rent due May 1. The low figure for May is not too surpriusing given that the federal government announced a program where small and medium sized busineses would only pay 25% of the rent with the government paying 50% and the landlord foregoing 25%. Melcor indicates they are focused on helping tenants get through the pandemic situation. As previously announced they reduced the distribution by 47% in order to preseve cash. Even with reduced rent collection and lower cash distribution the Melcor REIT looks attractive at recent prices.

Markets were down on Wednesday as the Fed chair predicted that the impacts of the pandemic would be realtively long lasting.

The S&P 500 was down 1.75% and Toronto was down 2.5%.

After the close, Linamar posted weak earnings for Q1 but strong cash flow. They also cut the dividend in half. I will update Linamar after seeing how the market reacts.

Thr latest rail car loading report for both the U.S. and Canada shows continued weakness and no sign yet of any increase due as the economy starts to open up.

Markets were down on Tuesday which may have been related to the realisation that the opening of the economy will be slower than hoped.

The S&P 500 was down 2.0% and Toronto was down 1.5%.

After the close, CRH Medical reported results. Revenues were down 13% due COVID-19 shutdowns. The decline will be much worse in this Q2. But thereafter the company believes it can resume its growth trajectory.

On Monday, the S&P 500 was about unchanged while Toronto was up 0.9%.

Canadian Tire was up 7.8% in further reaction to its Q1 report and its comemnts about how it is doing in April. I will post an update for it tomorrow and it is rated (higher) Buy at $107.91. 

Berkshire Hathaway is updated and rated Buy at $173.48. This is based on the high quality of the company and ists current low price to book value at 1.14. And with the stock market recovery since March 31, it’s actual price to book value today is even closer to 1. It will however likely suffer a noticeable operating earnings decline in 2020 due to COVID-19 and in particular its several subsidiaries that are dependent on the airline industry (Precision Castparts, FlightSafty and NetJets). Most of its operations outside of insurance and its utilities are being negatively impacted by COVID-19. But certainly a good portion of that impact is temporary.

On Thursday, the S&P 500 was up 1.15% while Toronto was about unchanged.

Markets continue to do well despite the huge unemployment figures and despite some forecasts that suggest that even after the economy reopens unemployment will remain somewhat elevated and GDP will not quickly return to the 2019 level.

I will post an update for Berkshire Hathaway tomorrow. At 114% of book value it offers reasonable value. But a number of its businesses are suffering badly due to COVID-19. I added to my position in it today. But it could get cheaper later this year due to the impact of COVID-19. 

On Wednesday, the S&P 500 was down 0.7% while Toronto managed a 0.1% gain.

There is a lot of earnings news for the market to digest.

After the close, Costco reported April same-store sales. For the first time in a very long time they were down. But excluding gasoline and foreign exchange fluctuations they were down only 0.5%. On that basis Canadian same-store sales were down 5%. The decline is due to social distancing and the closure of much of its optical, haring aid and photo services. The reason for lower sales in Canada versus the U.S. was likely due to the more wide-spread support of stay-at-home policies in Canada. As April progressed, Costco began limiting the number of people allowed into its stores at once.

In the U.S., Costco is now requiring all customers to wear face masks.

Costco same-store sales in May could decline due to the reluctance of many to wear a mask which is not required at competitor stores.

The market took this news in stride as the stock was down only 0.6% in after-hours trading.

The Melcor REIT fell back to $3.53 today. That’s a big discount to book value but the REIT will be facing higher vacancies and no-doubt write-downs on some of its properties. It has not yet announced what percentage of rent due that it collected on May 1. A lot of tenants may not have paid given their lack of revenues and given the added confusion on the federal rent subsidy that would see many tenants eligible to pay 25% of rent if the REIT agreed to a 25% rent reduction with the government picking up 50%.  It is certainly possible that Alberta has developed far too much retail space. Even now, many projects remain under construction in the Edmonton area. The bottom line is that the Melcor REIT looks attractive but remains a speculative investment.

On Friday, both the U.S. and Canada will report epic job loss / unemployment figures. In theory, that bad news is already reflected in the market.

On Tuesday, the S&P 500 was up 0.9% and Toronto was up 0.45%.

Oil prices have been recovering but are still very low.

Our report on VISA Inc. is updated and rated Weak Buy / Hold at $178.44. Although not bargain priced it is a good long-term hold. This is a high quality company.

On Monday, stocks were mostly down most of the day but finished the day higher with the S&P 500 up 0.4% and Toronto up 0.8%.

With RioCan under $15 today, I added to my position. It seems undervalued. But that depends on how soon the retail sector is opened back up and how far back to normal it gets.

I also bought today some of the Canadian Tire REIT. It’s not on our list but I may add it. It has held up far better than some other REITs because of its parent, Canadian Tire making up so much of its revenue adn that seems reliable.They just reported tonight that “Tenants representing approximately 96.5% of annual base minimum rent fulfilled their May 1 financial obligations to the REIT, compared to 97.2% for April 1.” They also reported Q1 results. Although they did have some market value losses on buildings their cashflows were up. Subject to further analysis, I think it is good value under $12.

Markets gave back some ground on Friday with the S&P 500 down 2.8% and Toronto down 1.1%.

Amazon was down 7.6% (but this comes after it recently soared) after its Q1 earnings came in below expectations and indicated that it would incur over $4 billion in extra costs related to the virus in Q2 alone.

As of 9:20 pm eastern time Sunday evening stock futures are down somewhat. 

My next update will be for VISA Inc. 

Markets backed off somewhat on Thursday with the S&P 500 down 0.9% and Toronto was down 2.9%.

Wells Fargo has stopped accepting new applications for home equity lines of credit. J.P. Morgan had stopped in mid April. Many millions are out of work in the U.S. Some of that will be quite temporary but some of it will be more permanent. The fallout in terms of defaults on loans remains to be seen. The market may be underestimating such fallout.

Canada’s deficit is now estimated to come in at $250 billion. Little to no attention has yet been paid to the impact of that.

Keeping some cash on hand in case markets retrace some of the recent gains is probably a prudent strategy. 

Markets were up strongly on Wednesday with the S&P 500 up 2.7% and Toronto up 2.9%.

This was attributed mostly to positive early results from a drug that appears to lessen the severity of Covid-19. The results just preliminary but the market reacted very positively.

Overall,t he markets have shown tremendous resiliency and a lot of enthusiasm for most stocks.

Third quarter U.S. GDP decreased “at an annual rate of 4.8%”. Since the lockdowns were only started in march in most places and were not fully in palace even by the end of March, this reduction provides little indication of how big the reduction will be in Q2.

Normally the change in GDP is annualized indicating what the annual drop or increase would be if it continued at the same rate for four quarters. That really does not make sense when there is a step change such as due to a lockdown. There will be a large decrease in GDP in Q2. But I don’t think it will make any sense to annualize that.

Rail car traffic in the U.S.  increased last week. Almost every week had shown a decrease since February 1 and so this increase is notable. It is partly seasonal but but is also an indication that traffic has bottomed.  Traffic in Canada also increased but the increase appeared to be seasonal as it was similar to the increase in the same week of the prior two years.

CN Rail is issuing $600 million in bonds. This may be to take advantage of low interest rates.

Heineken is issuing 1.5 billion eurors of bonds and this is on top of a 1.4 billion euro issue of just a few weeks ago.

Metro Inc. is added to our list rated Buy at $58.35. It’s reasonably valued and a good quality company for a long-term hold.

On Tuesday the Toronto stock Exchange index was up 1.1% while the S&P 500 was down 0.5%.

Markets continue to anticipate the opening up of the economy.

For example, the latest forecast of S&P 500 earnings for 2020 indicates a decline of 13% for 2020 versus 2019 with most of the decline occurring in this Q2. But the forecast then calls for 2021 to rebound strongly to 9% higher than the 2019 level. That seems optimistic. It may be that this forecast has simply not been updated becasue it is so difficult to forecast the longer term impacts of the shut down.

Things are truly bad in the energy sector. Vermilion Energy trades at $5.74 per share. After the close it reported a Q1 loss of $8.42 per share due to writing off asset values. It is truly ugly to see a company report a per share loss that is greater than its share price.

Markets continued to do well on Monday as the S&P 500 and Toronto were each up 1.5%.

Toll Brothers was up 6.9% to $23.91. New Home sales of course fell off a cliff with the shutdown situation. But a report today indicated that interest in new home purchases is starting to recover. Some of the people who have been house bound in tiny apartments are now longing for a detached house with a yard. Nevertheless new home starts are probably set to remain lower for some time. And that’s especially the case in Alberta due to the ultra low oil prices.

RioCan was up 5.9% to $15.99. It’s longtime CEO, Ed Sonshine, was on BNN today and said that he does not expect the vacancies that will result from the current situation to be anything like the 10% that happened to RioCan when Target left Canada (But RioCan got paid for that becasue they had Target in the U.S. guarantee those lease payments.)  He indicated that the decline in RioCan was very much over-done in his opinion.

CN Rail reported Q1 earnings after the close. Adjusted earnings per share were up 4% which was good performance given the blockades by protesters. They withdrew their guidance for this year but expressed optimism for getting through the current situation and indicated that they intend to maintain the dividend which was recently increased by 7%.

Markets were higher on Friday with the S&P 500 up 1.4% and Toronto up 1.2%.

Stimulus programs and signs of reopening have kept markets buoyant. Things that could push markets down include: continued weal economic data such as GDP and unemployment, Poor earnings reports and outlooks from many companies, oil companies shutting in production and also any perceived increased chance that the Democrats will defeat Trump in the Fall.

I still have work to do on Metro but expect to rate it somewhere in the Buy range. It’s at about a 52 week high. It’s a good company and certainly should continue to be a good long term hold.

The small business commercial rent subsidy program is good for tenants but not as good for landlords as I first thought. Landlords have to forego 25% of the rent in order that the tenant can participate. There will be pressure for landlords to participate. Overall, it’s probably not a bad thing for landlords since getting 75% of the rent beats getting nothing and trying to get it later. It may cause havoc on May 1 however as tenants might pay only the 25% and meanwhile the landlord has to apply and try to get 50% from the government sometime in May and has to coordinate with each tenant as to eligibility. There is a big administrative burden.

Trudeau has announced a rent subsidy for small businesses paying 75% of the rent for businesses that are shut down or where revenue is down at least 70%. This applies to monthly rent payments up to $50,000.

This could benefit many businesses and landlords. 

Beneficiaries among companies on our list,  that come to mind include the Melcor REIT and Melcor Developments and RioCan.

Canadian Western Bank might also benefit as some businesses (particularly in the business where it lends to certain franchisees) are assisted and have less financial pressure.

It may help some Boston Pizza locations stay in business. Royalties would not immediately be affected at all but if it prevents some locations from permanently closing, that will be beneficial.

AutoCanada rents many of its locations. It may qualify because the individual dealerships are structured as corporations and may be under the $50,000 monthly rent level in some cases.

Restaurant Brands would be benefited at the individual franchise level which and some of that benefit would flow to the parent company since, as I understand it, they are landlords to many Tim Hortons locations. 

My thinking is that the above companies would benefit but I note that the stocks have not reacted. I added to my RioCan position on the news because it looks like good value and I like the broad diversification across Canada. 

On Thursday, stocks had been somewhat higher most of the day but finished slightly negative with the S&P 500 down 0.1% and Toronto down 0.3%.

Aecon Group reported Q1 results. At a quick look it appears that Q1 results were similar to last year. Aecon indicates some work is slower or delayed due tot eh virus situation but it appears most projects are proceeding. I would expect this report to be somewhat positive for the stock price.

I am working now to add Metro to our list. Grocery stores and drugstores continue to do well.