October 18, 2012 Comments

While the markets were down very slightly today, our stock picks did reasonably well.

Hudson’s Bay Company is going to go public again. It was founded through the issue of a charter by King Charles II on May 2, 1670 as the Governor and Company of Adventures of England Trading into Hudson’s Bay and continued as a Canadian Corporation around 1970. I do like the history. I don’t like that it called itself the Bay for years and that it sold off its fur operations some 25 years ago (by my recollection). That was under old management but it seemed to be forgetting its proud heritage rather than celebrating it. Very dumb.

My inclination would be to avoid the shares. The Bay has had years to renovate its stores if it wanted to. Now it apparently wants to spend money on renovations just when Target is coming. I think it was very smart indeed to have sold off the Zellers leases at the huge price of $1.8 billion. But that is done and I believe some of all of that gain has already been pulled out of the company. As a shopper at the Bay over the years I have certainly been under whelmed.

To try to analyze this by reading the prospectus would be a daunting task. (I took a quick look at its statement of equity and see that it had a reduction of stated capital in 2010 — I don’t know what that means, it has had returns of capital to the owner rather than dividends in some years — which sounds like the owner extracting money such as leveraging the business up. In short there are many complexities.

And it would seem to me to be in direct competition with Target.

So, while it might turn out to be a good investment, my inclination is very much to stay away from it.

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