March 28, 2015

Alimentation Couche-Tard is updated and rated Weak Buy / Hold at $50.54. This company just reported exceptionally strong growth in Q3. It is one of the very best managed companies in Canada and has an exceptional history of growth. It is one of very few Canadian companies that has managed to be successful outside of Canada. It’s valuation has looked too high for several years but it managed to grow earnings at rates that more than justified the high valuation. Still I am hesitant to “pay up” in advance for such growth. Currently its earnings appear to be unusually high due to abnormally high margins on gasoline. If gasoline margins return to historic lower levels then the earnings would drop. They may be able to offset that with growth due to a recent acquisitions. But I expect this current quarter to be weaker due to the high U.S dollar and due to a possible return to more normal gasoline margins. It will likely continue to do well in the long term but I would be more inclined to sell or reduce my position at this time if I held it.

On Friday, the S&P 500 was up 0.2% and Toronto was down 0.4%.

Melcor rose 5.7% to $18.97 after announcing a modest stock buy back program and indicating that it views its shares as under-valued. Due to its thin trading volumes the company is restricted to buying back a maximum of just over 3000 shares per day. There was not much trading in the stock on Friday (most of the increase came late in the day)  and it could easily decline to $18 or lower and I expect it to continue to be volatile and to react to news on oil prices and the Alberta economy.

Toll Brothers was up 2.3% on Friday.

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