AutoCanada Inc. (ACQ.TO)

Don’t load up because it is a single business. Nothing changed in the fundamental business from $90 to $50. Valuation is not unattractive. Raised dividend 18 times in a row on a quarterly basis. It is a pretty good story of consolidation in the auto industry. Potentially an acquisition target.

Valuation is better than it was at $90. The story is that they need to make acquisitions to grow into the multiple that they are at. He would argue that a rollup is great, but there comes a point when rollups aren’t great any more. It is hard to find acquisitions and hard to integrate them into the business successfully. Doesn't feel this is in the top 20 names in Canada that you should hold. Looks a lot more attractive for a trade rather than something that he would want to hold for the next 12 months.

(A Top Pick Oct 16/13. Up 46%.) He held this all the way to the top of its run. Technically it broke down so he sold his holdings in the mid-$70’s. He acquired some more in the $62 range plus more in the last week. The growth is still there. Just made another acquisition in Toronto. Trading at around 15-16 times earnings.

Missed out on the way up, but has acquired some on the recent pullback. Owning dealerships is a very good and profitable business, especially when you can operate multiple dealerships. Multiple is a bit high at 10X their EBITDA, but he sees the consolidation as still in the early stages. He is selectively buying this on pullbacks below $60. Auto dealership business has proven to be very defensive even during recessionary times.

Last couple of sessions’ activities is Warren Buffet related. It got a bit ridiculous at 30 times earnings recently. Margins are about 60% on repair and 5% on sales. The underlying business is not that attractive.

Warren buffet spoke favourably about this company today. There is a lot of value in owning dealerships. The owners are getting older and looking for exit strategies. They are gobbling them up at very accretive prices. It should support further dividend increases. Parts and financing give it stability against raising and declining auto sales. He is interested in adding to his position.

It needed a pullback over September because of the parabolic move. It had gone too far for too long. If it hits the trend line and breaks it, then you want to worry.

(A Top Pick Oct 16/13. Up 48.97%.) On multiples, it was trading well north of 30X earnings, but has now pulled back significantly and probably trading at around 16-17 times next years earnings. Trading at basically half of the price earnings to growth ratio. Lots of room for them to continue to execute. Besides growth by acquisition, they have been very good at organic growth as they integrate the different dealerships. Still a Buy. Yield of 1.7%.

If you own, he would put a Stop in under the previous lows at around $60. He thinks the market will do well this winter, so if you get sold out, you can always buy it back.

Have done some big deals and have made some pretty substantial acquisitions and have grown very rapidly. There is nothing that says you can’t combine car dealerships and get efficiencies, but he is really concerned about the Canadian consumer, which has a lot of instalment debt and a lot of mortgage debt. Car loans are very, very expensive. At this stage of the cycle and with Canadian economic situation being as tenuous as it is, he would not want to own a company selling cars with the majority of the people relying on debt. There have been discussions that the CEO may buy the land with the dealership going to the company to help finance things. He doesn’t like it when interests are not aligned with shareholders.

Largest publically traded multi location dealer in Canada. They buy dealerships where the owner wants to retire and has no succession plan. The stock got ahead of itself earlier the year and so you are seeing a pullback based on valuation. Hold if you own it or watch it otherwise.

Reported their earnings about 2-3 weeks ago which were a little disappointing. This has been a great performer over the last couple of years. One concern is what they are paying for their new businesses. They might be pushing the envelope a little bit too hard. The low hanging fruit has already been taken. In a rollup model you have to keep that momentum going, so you might end up taking your eye off the valuation a little. He passed on this one.

(A Top Pick Oct 16/13. Up 76%.) He has trimmed his holdings several times, because it has done so well. It has been a little bit of a rocky road in the last 2 months, but they continue to execute on their strategy and it ranks well in his process.

A Western-based company that is rolling up a bunch of car dealerships, primarily in Western Canada, but are moving across Canada. Focused on trucks primarily, which are higher margins. A real growth story for several years, but has corrected here on concerns their pace of growth is slowing down. He doesn’t think that is the case. Even since the quarter when people got a little bit worried, they’ve had 2 acquisitions, so he feels the story will continue to play out. 25%-30% upside in the next 12 months is possible.

(A Top Pick Sept 27/13. Up 93.95%.) Recently had a dip, which is really unjustified. The bottom line missed by a few pennies, because they had made 8 acquisitions in the last quarter. Historically they make about 1 or 2 a year. Therefore SG&A (Selling, General & Administrative) costs were higher with 8 acquisitions. Legal and accounting costs will be higher. She would overweight the stock in a portfolio as she has huge expectations for it.