On Tuesday, the S&P 500 and Toronto were each up 0.1%.
Our big mover was Canadian Western Bank up 4.8% to $36.34 after it announced the acquisition of a $900 million dollar portfolio of equipment loans and leases. This will add 10 cents per share in the fiscal year which starts today and another 10 cents the year after that. There could be continued gains after that to the extent that the customers stay with CWB after two years which they have no obligation to do.
On that basis, the approximate $1.70 rise in the share price was not really justified by this news alone. But it does signal management optimism about the future and that combined with higher oil prices could justify the stock price. I still expect CWB to continue to rise. But with this gain on top of all the other gains in CWB since it bottomed around $23 briefly in May amid the Home Capital scare I decided to sell what amounted about 12% of my CWB yesterday. It remains a very large position for me. Having added a lot to my position in the 20’s it seems prudent to trim somewhat now. This is particularly the case given that I have wanted to have a higher allocation to cash.
CWB is down 2.4% this morning.
This morning the Competition Bureau has raided grocery stores over possible price fixing. This is welcome and surprising news for the country. In my opinion, based on many years of observation, the Competition Bureau has done almost nothing to foster competition in Canada. In many products and services there seems to be only a small handful of competitors. Yet mergers and acquisitions are constantly allowed to happen. Recently the merger of the two giant potash producers was allowed despite the fact that the combined entity will totally dominate the market. I mean no one seems to notice that the potash producers are opening part of a price-fixing cartel operating outside of North America (CANPOTEX)! I believe the cartel would be illegal in Canada and the U.S. which is probably why it does not operate here. Years ago I believe the two and only large propane distributors were allowed to merge.
I am an investor but I am also a citizen and there is a place for limits on market power and limits on price collusion. Ethical behavior needs to trump profits and that can include making unethical anti-competitive behavior illegal.