U.S. markets finished only moderately higher but the Canadian market did very well today. It’s enough to make a person dizzy. But the point is to just buy individual stocks of good companies at good prices and not sweat the volatility too much. It’s a bit like a roller-coaster ride. Very scary but if you just hang in there it all works out in the end.
In an interesting development, after the close of trading, Telus announced that it will hold a vote to convert its non-voting shares to voting. I had thought that this might happen but did not know when.
The non-voting shares have traditionally traded at a lower price and in the case of Telus I have said we should favor the cheaper non-voting shares.
I don’t have Telus on the list above at this time. But the last update (Buy rated at $50.70 on May 22, 2011 for the non-voting shares) the last sentence in the summary cell was: “We prefer the non-voting shares since the voting shares
are costlier and in this particular case we do not place any value on the vote.”.
I searched back in the old comments since I was sure I said something about the non-voting shares eventually becoming voting. Back on June 27, 2007 the comment included: “In the very long run the non-voting are worth the same as the voting and someday the two classes will likely become one.”
And our article on Dual class shares (of February 6, 2006) states:
“Class merger may be another reason to purchase one class over the other. For example, if there is the possibility of the merger of the classes you may want to purchase the non-voting share because the premium on the voting class may evaporate.”
So, the point is that this Telus development was not unexpected, but it was certainly a long time coming.
Canadian Tire has a very wide gap between its very thinly traded voting shares ($73.50) and the much more numerous non-voting shares ($65.14). I would be very leery to buy the voting shares. I have said previously that I can’t see any justification for that gap. (I can speculate that maybe some party values that vote, but fundamentally I can’t see its value). My understanding is that in the event of any kind of change in control of Canadian Tire (say the founding Billes family sells out) then the non-voting shares become voting. With this development at Telus we may see the voting shares at Canadian Tire drop in price. (In the case of Telus the non-voting should rise to close the gap tomorrow).
Walmart dropped about 4% today on the revelation that its low price strategy of late caused a drop in profit. My recollection is that back in the Fall analysts were loudly applauding lower prices as it would lead to higher sales and same-store sales. But for some reason they now seem surprised this hurt profits. At the end of the day Walmart still looks like good value. I was tempted to add to my position today but did not.
My understanding of the Greek debt swap deal is that it is still subject to each individual bond holder voluntarily turning in their binds for new long-term bonds at some 47 cents on the dollar. This will happen March 8 through 10th. I read today that they expect a 95% take-up rate. I suppose I am only guessing but I doubt that they will get to 95%. I would think that is a few bond holders refuse to go along with the voluntary swap then those bond holders might get their 100 cents on the dollar. Otherwise this swap that is not “officially” a default would have to be an official default. Also many of the bond holders apparently hold insurance against default. If so, I really can’t see how those parties can volunteer to take a loss and give up on their insurance. (Their stakeholders would sue). Meanwhile this deal may also require agreement of each and every member of the European Union. That is no small hurdle.