Tuesday was a positive day in the markets with the S&P 500 up 0.7% and Toronto up 0.6%.
Most of the stocks on our list were higher. Notably, Constellation Software was up 2.6% and FedEx was up 1.8%.
Toll Brothers was about unchanged as there was mixed news on the U.S. housing front. Housing staters fell 8.6% in February and single family starts were down a hefty 17%. But sales of existing homes rose 11.8% and mortgage rates are at their lowest level in a year. Housing starts are often volatile and these later two factors may suggest that the the drop in single family home starts in February will prove temporary. Home builder Lennar reports earnings tomorrow, Wednesday and its results will likely impact Toll’s price.
After the close, AutoCanada announced it had arranged the sale and lease back of two additional dealerships. This generated $24 million of cash but comes with the obligation to lease the sites back for the next 19 years. In theory this does not really add any value since the price received presumably simply reflects the value of the lease obligation. In practice there may be some benefit if the REIT that purchased the dealership has access to low-cost capital due to its stability. These transactions also provide a way to leverage AutoCanada’s business as they become an asset-lighter company. This can work out very well if they become more profitable. Or it could become dangerous if revenues fall and they then have lease obligations as opposed to owned assets. I am not sure what to think of this but I hope that the new management knows what they are doing. It is another sign that this new management is very active in making changes.