bbarberayr

GDL is a stock I used to follow closely. Holding period was from 2001 to 2005, during the NA building boom. The decision to sell was based on a few key variables including direct comments from the Chairman, Stephen Jarislowsky, in the 2005 annual report: "It is hard to imagine a rise in construction and home improvement spending {given the evolving macro picture}". I deeply respect Mr. Jarislowsky who was Chairman for 19 years and is still (my understanding) an "honorary" director. GDL was on a watchlist in the following years but I found better alternatives after. I stopped following closely after but was aware of management hiccups. With your post, I decided to review the company, mostly for fun, because the liquidity is low and I tend to avoid public companies that are transferred from one generation to the next (also like Power Corporation). But here are a few potentially useful comments. The market price to book value has become incredibly low and expectations for a return-to-the-mean type of rebound are reasonable but: -even notwithstanding the "dark chapter" attributed to the short-lived outsider CEO (2014-5), sales are about the same level they were 10 years ago and the business profitability is based on very low net margins and GDL has not recovered the above 2% net margins they used to achieve before. In other words, the moat has declined. -IMO, a key variable here is what will happen to housing markets in Canada. In the run-up to the housing peak in 2006-7, under the leadership of the previous Goodfellow and Mr. Jarislowsky, GDL lowered debt and got ready to thrive during the following phase. In the 2009 report, Mr. Jarislowsky wrote: "It was obvious that the housing boom could not last". I understand that they then bought distressed inventory and gained market share but since 2010-1, net debt has increased ++ and their financial flexibility is low vs various potential scenarios going forward. -Their profile has evolved in the sense that they are relatively more exposed to new housing construction versus home improvement spending which is stickier in tougher economic environments. -In the 2007 annual report, Mr. Jarislowsky wrote: "The real test in life comes when times are tough." and IMO the 2019 GDL is not sufficiently ready for adversity. At first sight, the large discount to book value is appealing but I find that GDL is trading pretty much where it should. Sorry for the negativity. My 2019 resolution for involvement here is to spread less negative posts which means more absence unless the environment changes. :) Thanks for the review - certainly don't mind negative opinions, especially when expressed thoughtfully and respectfully. Differing views only help with understanding the stock. I do agree that there are some risks with the Canadian housing market, but I see that more as a Toronto thing and a slowdown in Toronto and region would hurt, but 60% of their sales are Quebec, Atlantic and the US, which haven't had the same bubble as Toronto. but I am watching that. The other thing which makes me optimistic is GDL has never made less than $0.85 per share from 1996 to 2015 and had average EPS of $1.41. They then got into trouble with their new ERP System and took some losses, but seem to be turning things around and had had positive EPS of $0.24 and $0.21 the last 2 quarters. Unless their earnings capability has somehow been impaired or competed away, if they can move back even to the lower end of that previous period (say $1.00, but I expect higher), hard to see the stock doesn't move from $5.00 to at least $8 or $9.

Agree, all the auto companies are extremely cheap - I think this may be some bad analysis by the market. It seems to be saying now that the US has hit the 17 million level in auto production, there is nowhere to go but down, but with employee wages going, this would be an area I would think extra spending would go to. And if we do get the self-driving car cycle going, there is 350 million cars in the US that will need to be replaced by say 150 million new cars, so auto production would be be strong for the next decade. If we do get a recession, then this logic won't work, but if we don't (and I don't think we do), then these auto stocks should do well.

Many Canadian companies are very cheap right now. Take a look at the Power Corp companies which are pretty much at their lowest valuation in the last 20 years (see the TD report if you can). It has been beaten down by tax-loss selling (I believe) and also the general aversion to life insurance companies with rates following, but their primary asset is Great-West Life which is probably the best run life and health insurer in Canada and doing fine. Small industrials like Hammond Group HMM.A is at a sub-5 p/e and 40% of book value. They just completed a major expansion, so debt if in the high side, but business is very good, so this should be worked down. Another idea is wood distributor Goodfellow - GDL. It had a bad year a couple of years ago when it put in a new IT system and it gave wrong prices (too low!), but that has been fixed and profitability is being restored. Has never traded at a cheaper valuation in at least 25 years. I'd also take a close looked at European stocks for those have the interest. You can look at the big banks like ING, which is well run and at 70% of Book and an 8 p/e. But also the small caps - companies like blind manufacturer Hunter Douglas HDG, which is at a sub-8 p/e for a successful worldwide company, making things people need (at least my wife says we do!) You have to buy stuff when its on sale. And unless we do get a ful-blown recession, a lot of stocks are looking pretty good.

I found it useful in helping to plan retirement spending approaches - for example, see https://www.firecalc.com/

I'm seeing a lot of the earnings call transcripts on Yahoo Finance for free. For example - https://finance.yahoo.com/news/edited-transcript-voya-earnings-conference-194246411.html Good catch on using the App to see older articles - I wonder how long that will last.

This is a bit of picking a particular date to make an article more interesting and sell more magazines. In 2008, Canada was at the end of a very prosperous stock market cycle and was highly valued and had dramatically outperformed the US since the 2003 bottom. Since then, the high commodity conditions have come off and this high valuation and expectations of high commodity prices has come down. If you pick a different start date, day the market bottom in 2003, and compare the EWC to the SPY to take out currency fluctuations, you'll see both Canada and the US are up pretty much the same percentage, with very different paths.

Clarke Inc - CKI.TO has been a really good one, but seem to be winding down the company. Some excellent energy companies like CNQ and SU, especially if you think energy does well the next 10 years. Some of the European ones may be cheaper now (eg. BP, RDS), but both made good acquisitions through the downturn. Similar with mining companies like TCK and LUN and the gold miners if we get into a strong commodity cycle. You can also just but the stock market (X.TO) - it is pretty cheap and will do well if more companies start raising money. Re POW, all of the North American Life Insurers has had a rough decade and POW was overvalued in 2007, so that had to be worked off. If you look at the ROE for major holding GWO-T, it has had the best ROE's of pretty much all the life insurers the last decade, so if interest rates continue to rise and people get a little less negative on the life insurers, I think you may be surprised at how well POW does. I would avoid the Canadian banks at this time until we see how tje real estate slowdown shakes out and what sort of losses the banks take - right now they have low loan losses on the books and this may be a big problem.

A 12% annual return will drive big gains compared to an 8.5% gain over longer period of time. If you take a 20 year period, an 8.5% return turns $100,000 into $511,200 and a 12% return turns $100,000 into $964,600, almost double, definitely worth the effort in my book!

KBR upgraded BPOP from Market Perform to Outperform a couple days ago - don't have the details, but it would appear the analysts are starting to recognize the value in these stocks.

EVTC used to be a division of BPOP, but was spun out a few years ago with a lot of goodwill and debt. Because of this, GAAP earnings are understated as they write down these expenses. So, while I'm not generally a fan of adjusted earnings, in this case I think it makes sense. They are still forecasting a GAAP profit in Q$ of $0.03 - $0.13 and adjusted earnings of $01.8 - $0.28 for Q4, so profitable still. Last year, adjusted EPS was $1.67, so even if they get back to 80% of that, stock is at less than a 10 p/e. In their OCt 22 conference call presentation (https://seekingalpha.com/article/4121932-evertec-2017-q3-results-earnings-call-slides), they say they have restored 60% of ATM's and 80% of bank branches for BPOP - I'm sure this is higher now, so business is returning. Plus, all the federal contractors and trades are all spending money in PR, likely using credit cards and generating fees for EVTC. Unless you think Puerto Rico doesn't come back like bci23 writes, almost certainly the stock will be higher in 2 or 3 years.

Been dipping my toes into a couple of the Puerto Rico stocks the last couple weeks, specifically BPOP and EVTC, but there are 4 direct Puerto Rico stocks: BPOP, the largest bank on the island OFG - a smaller bank GTS - healthcare insurer EVTC - credit card payments and IT consulting There are other stocks which have been hit pretty hard for the exposure to the island like the state/municipal bond insurers AGO and MBIA. My positions are fairly small and it is hard to know where the bottom is, but my rational is simply that: 1. They are cheap (BPOP is 68% of book value and sub-10 p/e) 2. They are beaten down - BPOP generally trades with the KRE, but is down 20% YTD compared to a flat KRE 3. The island is recovering and will get rebuild over time and money will flow in and the businesses will recover Seems a lot of the shorter term and nervous money has been selling, plus probable tax loss selling, but for a patient investor, seems like a pretty good bet will turn out to be a good investment. Thoughts?

I wouldn't put a lot of of credence into Hussman, given his poor track record. At some point he will be right, but over the long cycle, his approach does not seem to work. Re CAPE specifically, it really appears to be a case of fitting the 10 year chart to the S&P results. See this - http://www.philosophicaleconomics.com/2014/06/critique/ Also, seems like most investors using CAPE as a tool the last few years have underperformed.

You should add some more screening capabilities like p/b, p/s. Take a look at http://finviz.com/screener.ashx?v=111 for a good screener. All-in-all, looks like you have done some good work here.

Found this: "Well, it’s worth noting that Teranet-National Bank numbers are as stale and largely irrelevant as Kevin O’Leary by the time they’re published. They track ‘solds’ which were registered a couple of months ago, and only those homes for which two sales over time have been recorded." http://www.greaterfool.ca/2017/06/15/stats-and-lies/

I saw this too. Hard to reconcile with the big drop in prices the TREB showed a couple days ago.

A friend of mine owns a used car lot and he loves the older, small Japanese cars - can sell them no problem at a good price. People want them because they are seen to be higher quality, their engines go forever, usually well over 300,000 miles and less worries about major repairs like transmissions. He has a lot of younger buyers, like students, but also some older people who just want unflashy, cheap transportation. He says he'd much rather get a 2007 Honda than a 201 Chevy.

Anyone know of a place to get long term valuation criteria on TSX stocks? Morningstar.com has 10 years of valuation criteria, but I'm looking for the ability to look further back to before the financial crisis to compare valuations then with current ones. Gurufocus.com has 15 year valuations, but only for US companies. Thanks for any suggestions.

Realtor.ca has a new (I think) feature which lets you show listings since a certain date. The thing I find very interesting is in bubble areas like Toronto or KW, half of the active listings on the market have come on in the last week. In non-bubble areas like Montreal, 10% of the active listings have come on in the last week. Seems like people are starting to panic-sell to try and get out while the market is hot. If supply continues to come on-stream, this, on top of the end of financing companies like HCG, could be what pops the bubble.

https://onbeyondinvesting.com/blogs/blog/i-attended-the-top-of-the-canadian-housing-market-so-you-didnt-have-to Highlights from the Toronto Real Estate Wealth Expo

The whole clothing retail world is going through very dramatic changes. I think it is just too hard to pick winners and losers at this time and am waiting till things get crazy cheap or staying away. Even currently relatively safer retailers like grocery may have a completely different business model in a few years. Given the risk, I'd like to see like a 7 p/e on a strong balance sheet before buying.

FWIW - Another American Hedge Fund guy looking to short Canada Real Estate: https://betterdwelling.com/city/toronto/marc-cohodes-short-canadian-real-estate/

Been looking at this too. Most of BV is intangible, GAAP earnings are very low, but I agree there is a lot of room for improvement. Plus stock is selling off as XRX shareholders who don't want are dumping, so may get a bounce soon. Who are other "industry" companies that you see the 15% margins in? Seems a lot of their services are fairly low tech, so would not want to compare to high end consulting firms.

Very good point. Kind of makes a survey like this, while interesting, not particularly meaningful in looking for benchmarks and trends.

According to this website - http://www.kiplinger.com/tool/investing/T041-S001-top-performing-mutual-funds/index.php?table_select=SmStock The top 10 year return for small cap stock funds is 21.29% and for large cap is 12.23% So, investors here, on average, beating the absolute best mutual funds out these. Somewhat surprising, even taking into account the extra costs and restrictions fund have, given how many funds are out there. But maybe not, given the average person here is far more interested in the market than most. Hope if everyone is calculating annualized return correctly and not just doing an average of the last 10 individual returns, which would overstate things.

I've subscribed on and off over the years (mostly on). Generally a very good source of ideas that are off the radar and have provided some of my biggest winning stocks. Articulate writing, and responsive to email questions, etc. Especially if you don't have time to look into a lot of stocks, could be very worthwhile. The downside to it is that their approach is cyclical, so does very well at certain points in the market cycle and not so much at other - see http://www.contratheheard.com/cth/returns/index.html They tend to hold stocks for large gains over several years, so not a lot of activity, which can be a plus or minus. The biggest drawback I've found with them is when they get too popular and they send out a buy notification, the stock will open 15% higher than their purchase price, so you can't really match their record by just buying what they buy or even get into some of their stocks at a reasonable price. Partially this is because many of the stock they buy are small caps and partially because of their popularity at times. If you want to try and match/beat their returns, you do need to put some thought into your buys and sells. Their approach is they are just showing you their portfolio, but this should just be a starting point for your own decisions - I would agree with that, but I'm sure many others just blindly follow. Currently, this is not an issue and it is a good time to subscribe. They typically buy most of their stocks in late December, so you may want to move quickly if you do subscribe.