On Thursday, the S&P 500 was down 0.2% and Toronto was down 0.4%.
Alcanna was up 3.8%
Linamar was down 3.2%. It may continue to suffer due to the microchip shortage that is lowering vehicle production. But ultimately it remains a very good company and I believe is one to buy on dips. But it certainly can be volatile.
I noticed today that TD was selling a new issue of Chorus Aviation debt due June 30, 2017 (so almost six years from noe) and paying 5.75%. The issue sold out quickly raising $85 million. The 5.75% seems attractive. But in order to buy these you have to be registered for the alert emails from your broker and you have to be willing to act very quickly. There is often little or no time for analysis. In this case it is unsecured debt. These debentures are NOT convertible. The most you will get is your 5.75% return. The worst that could happen is the company goes broke and you lose much or all of this. It’s hard to make a snap judgement about the financial strength and risk of Chorus Aviation – my sense is that they are reasonably strong but I really don’t know.
These debentures do not trade. If you bought you are in until June 30, 2027. If you are going to invest in these sorts of things it would be wise to spread it over a number of names in order to limit the risk.
Overall, I’d rather try to find a convertible debenture. For example the Melcor REIT debenture which I own and which I have mentioned pays 5.1% and matures December 2024. You buy it around par or maybe 101. So not as high as 5.75% but it trades because it is convertible. The conversion price is probably too far out of the money to be worth anything but then you never know.
HOUSING STARTS
The August house start figures from CMHC came out today. The headline is that starts are down slightly from the July level. But the fact is they are at very high near record levels.
Given my Melcor Investment, I am highly interested in single family detached home starts in Alberta. These were up 73% versus August 2020 and in Edmonton up 40% and in Calgary were up 148%. But of course 2020 was hit hard by the pandemic. Comparing to August 2019, Alberta single family home starts this year are up 78%. But if we compare back to August 2014 before oil prices declined sharply then Alberta starts are down 24%. Therefore it looks like the Alberta home starts are fairly robust but not as high as 2014. A look at total housing starts (includes multi family and attached) confirms the same, Alberta starts are well above the levels of a few years ago but not back to the boom year levels. Overall, I believe the figures support a view that Melcor Developments will report strong sales in the last half of this year.
Meanwhile the pandemic is a concern and could slow job growth and then housing starts in Alberta. The new Vaccine Passport should help to get more people vaccinated.