On Wednesday, the S&P 500 was up 0.2% as U.S. banks rose after some of them reported higher-than-expected earnings. Toronto was up 0.4%.
Shopify was up 2.1%. With a great future but no current earnings, the value of this company is somewhat “untethered” and so floats around, probably based on “technical” trading and momentum. The founders of Shopify have done extremely well and I believe they have been very astute in selling shares and raising a huge war chest of cash while still retaining control of the company.
There were no other particularly noteworthy moves in the stocks on our list. Bank of America which is o longer on our list was up 7.2%. I have a few shares bought some years ago and sold today about half of those for more than twice what I paid for them.
Having found myself with far too little cash to take much advantage of the low stock prices in December, I now plan to try to raise my cash position. To that end I sold at a gain some of the bargain shares I did pick up in December. This made for a small reduction in my position in Boston Pizza. Earlier I had slightly reduced my position in Linamar. I also put in an order to slightly reduce my large position in Canadian Western Bank.
One stock that could very well decline before it ever (hopefully) turns around is AutoCanada. As mentioned in an earlier post, December auto sales in Canada were rather ugly. And yesterday I saw a comment by an apparent industry insider that said the first half of January is down again. It’s entirely possible that AutoCanada will do further write-offs of goodwill. But I think they will remain cash flow positive. Most of their debt is “floorplan” debt to finance their inventory. Other than that their debt is not tiny but seems reasonable. I was originally attracted to AutoCanada as a growth-by-acquisition company which can be a very good strategy (successful examples include TFI International, Stantec, Alimentation Couche-Tard, WSP Global, Constellation Software, Fortis Inc, and Berkshire Hathaway) Unfortunately it turns out AutoCanada was over-paying for acquisitions. Then they had a period with poor management (Steven Landry, who was brought in from outside AutoCanada) which led to an apparently extraordinarily dumb purchase of Chicago area dealerships leading to an almost immediate large write off and a change of directors and CEO. I think the new Chair (and defacto CEO) is very competent but he is trying to deal with a mess and running into a slowing auto sales market.