On Wednesday, the S&P 500 fell 0.2% while Toronto was up 0.7%
Canadian National Railway was up 2.6%, The Bombardier Series 4 preferred share was up 2.3% to $19.00, Bombardier was up 6.4% to $2.49. The RioCan preferred share was up 3.5% to $22.00. Constellation Software was up 3.8% to $441.
Melcor was down 2.8%. Melcor released earnings after the close. From my read of it, the earnings were earnings were quite good and the long-term outlook was positive. Management noted that there will be an impact from lower oil prices but also noted Melcor’s long history of dealing with the cyclical economy and noted its strong financial position. To me, the shares look very cheap. I would absolutely be a buyer at this price. One can always come up with a doomsday scenario where the Alberta economy absolutely collapses but that is certainly not something I expect.
I have started to run the numbers on liquor Stores N.A. and it does not look good. Q4 is their best quarter of the year and in that quarter, earnings were about equal to the dividend. Over the year earnings are not much more than half of the dividend level. Disturbingly, they appear to have changed the report this year to no longer talk about adjusted earnings which (coincidently?) are down about 34% whereas the adjusted operating margin that they do focus on this year was down only about 3%. They did however have strong sales results in Q4 and their margins or markup have improved slightly. It seems to me that they have bloated the company up with higher head office costs. They face a lot of capital expenditures while paying out a dividend that is 85% larger than earnings. The industry in Alberta is becoming even more competitive. On top of that it would be a surprise if the provincial government does not increase taxes on Alcohol in its budget on March 26. The yield at 7.2% certainly seems good but has to be considered to be at risk. If I held this, I would sell it.