October 16, 2019

On Wednesday, the S&P 500 was down 0.2% and Toronto was little changed.

Stantec was up 2.2%. Toll Brothers was up 2.9%.

Linamar was up 2.4%. This was likely related to General Motors reaching a tentative union deal. That’s good. On the other hand Trump said today that there was no problem starting a trade tariff war with Europe since the U.S. can’t lose such a trade war because the U.S imports more from Europe than it exports. That kind of talk is not good for a company like Linamar. Trump has also talked about the chinese agreeing to buy more U.S. agricultural products. If so, that should be a positive for Linamar’s agricultural division. But I suspect it is far too early for farmers to be ordering new equipment.

The Boston Pizza units did not show much reaction to the news today that a smaller restaurant royalty entity (SIR Royalties – whose main brand is Jack Astors) is cutting its distribution by 16.7% after same store sales fell 5.9% in the latest quarter. They complained of a change in customer behavior in the full service restaurant business including more skip the dishes type orders which do not generate much in the way of beverage sales. This seems to have come up rather suddenly. They note that just last year they increased the distribution twice. 

It may be that “the market” does not view the situation at SIR Royalty Income Fund to have much relevance to Boston pizza Royalties Income Fund. I don’t know anything about SIR but I understand from BP that the full royalty is collected on skip the dishes type orders. Also BP Royalties excludes alcohol sales and so any decline there does not directly affect the distributable cash. BP has very little analyst coverage and we may see a delayed reaction tomorrow. As noted below I sold some BP units today to lower my risk. In one RRSP account that had a heavy allocation to BP I sold half the units. I have some also in a taxable account and did not sell in that account.

The latest rail car loading reports were out today. In the U.S. railcar loadings have been weak all year. Early this year they were running below the 2018 levels but above 2017. In the Spring they fell back to about the 2017 level. More recently they fell back to the 2016 level. In this latest week they are noticeably below the 2016 level. Not a good trend!

In Canada, the data had been much stronger with record car loads most of the year but more recently falling back to the 2017 level but still well above 2016 and with this week stronger than last week. 


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