Friday’s action saw the S&P 500 finish down 0.2% and Toronto unchanged.
AutoCanada bounced down 3.0%
Linamar was up 2.6%. It is holding up very well in the face of the continuing chip shortages that are lowering auto production and that will likely be a big headwind for Linamar for Q3 and Q4. Linamar is a great company and any big dip will be a buying opportunity.
Penny stock RIWI bounded up 13%. It’s likely to continue to be volatile.
The trading yesterday in Alanna was interesting and provides some lessons. On Thursday night I noted:
“After the close, Alcanna announced it will sell itself to a company called Sundial Growers. this is a sale for shares of Sundial and not for cash. Sundial trades on NASDAQ. A the current price of Sundial the transaction is worth $9.12 per Alcanna share. The deal will not close until late December or perhaps later. It is subject to certain regulatory approvals. Alcanna closed today at $8.09 and it seems the reason it rose from $7.00 on September 8th was that word of the transaction had leaked out (which is not impressive as management is supposed to keep such things secret by law). I’m not sure this stock will go up much tomorrow given the uncertainty in the value that will ultimately be received (Sundial shares could decline) and given the wait involved. I know nothing about Sundial and if I still owned this I would likely sell tomorrow.”
As it turned out Alcanna opened Friday morning at $8.63 and within a few minutes peaked at $8.93 and then fell as low as $7.77 and closed the day down slightly on the day at $8.06. Volume was heavy with 790,000 shares traded compared to the daily average of 99,000 shares.
What appears to have happened is that some investors initially saw the $9.12 transaction price and bid the price up. But then the market started to focus on the fact that this was not in cash but in shares and there would be several months delay in getting those shares. Also the buyer Sundial initially opened higher but then fell as the day went on.
If I had been quicker in my thinking on Thursday night I might have recommended a trading strategy I have mentioned before. Say you held these shares and wanted to sell on Friday morning. Rather then wait till morning, you could place your limit order at a price you were okay selling at such as $8.50 in this case. Then if it opened higher you would get the price at the open, in this case the $8.63 (assuming your order did not push the open price down). If it opened lower than your $8.50 you would still have had the same ability to sell at the market price on Friday mornings or to decide to just keep holding.
What I would not have recommended on this stock in the middle of news like this was to enter a market order on Thursday night. That would have been an order to sell at a unknown price which could potentially be lower than you were comfortable selling at. Market price orders are fine during the trading day although only on high volume stocks. A market order even on a blue-chip is dangerous to place outside of trading hours since you never know what news could arise by morning.
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In other news, I was surprised at the Boston Pizza Royalties Income Fund’s announcement that it is raising its monthly distribution from 6.5 cents to 8.5cents. I would have thought they would be struggling due to the continued partial lock-downs and that more locations would be closing. This gets them fairly close to back to the 10.2 cents of pre-pandemic (They had been at 11.5 cents in 2019 but found that unsustainable even before the pandemic).
As an Income Fund, the BP fund is exempt from income tax but only if it distributed essentially all of its earnings. For that reason it is not in a position to just let extra cash build up. Keep in mind too that this is a top-line fund. It is not directly tied to profits at the restaurant level but just to food sales (alcohol is not included). Perhaps the future is not so bad here, higher food prices will lead to higher menu prices and higher revenues and higher distributable cash for the fund if customers return to their old eating-out patterns.