Markets were negative on Tuesday with the S&P 500 down 0.5% and Toronto down 0.2%.
Toll Brothers was down 4.5%.
Melcor Developments was down 4.55% to $5.87. Today’s dip may have been related to lower oil prices. I continue to find it difficult to understand why Melcor’s price should be so low. The book value per share is $32.76 or 5.6 times higher than the share price, 460% higher than the share price. I find it hard to believe that the accounting rules would allow the book value to over-state the true value by 460%. Traditionally the accounting book value was always meant to be conservative. This is the complete opposite.
It’s certainly true that the Alberta economy faces hard times and that home building is significantly down from the peak years. But the building of single family homes has not ground to a halt. The population of Alberta is not declining, it is still growing. Melcor does not appear to be in any danger financially. With record low interest rates, the price of homes in Alberta has not declined very significantly. The Teranet home price index shows a decline of 8% from the peak values. It’s just not clear to me why the market should value the equity in Melcor’s assets so very much lower than the book value.
Meanwhile, AutoCanada was up 10.8% today. I did not see any news to explain that.
Watching the presidential debate tonight, I don’t see why the market is not more worried. President Trump stated (once again) near the end of the debate that he will not accept that the election was fair if he loses. He repeatedly states that the mail-in ballots are a big problem. He specifically refused to say that he would ask his supporters to remain calm between election day and the time when all the mail-in ballots are counted. If he is ahead on election night (because republicans are more likely to vote in person) and loses after the mail-in ballots are counted I would expect wide-spread riots in the streets of America.