AutoCanada Inc. (ACQ.TO)

(A Top Pick April 27/16. Up 11.88%.) His original reason for buying this was for a recovery in Alberta in oil and a bounce off Fort McMurray. He got stopped out of this.

It has been flat lined for a couple of years now. They had significant exposure out West and that hurt their results. It is a turnaround play. Car sales may have peaked. As the Canadian economy continues to get more employment and population growth it should do fine over the long term. It is not on his radar screen at present however.

Chart shows a long base from early 2016. The one thing that can be said is that it has broken its downtrend, which is pretty positive. Normally, the longer the base, the better the entry point it provides. However, the auto business is starting to see a bit of saturation now.

They own a network of car dealerships and are concentrated in Western Canada. There has been weakness in retail sales which has put a damper on the stock. However, it is quite likely that the lows are in, and it seems to be mustering a choppy uptrend. The company doesn’t seem to be consistently meeting earnings expectations. He would want to see a more consistent progression.

It is an alternative to an energy name. The business is very stable. They can grow pretty quickly. (Analysts’ target: $26.50).

He just started buying this. It was washed out because of Alberta exposure. 2/3rds of the dealers are privately owned and looking to transition out. They should do well, even though nothing should happen for the next 6 to 9 months. (Analysts’ target: $26.50).

He really likes the story. They were buying up auto dealerships, but management made many promises which they didn’t do. New management came in and cut the dividend quite substantially. They are slowly going to buy 2 or 3 dealerships. Integrated their back-office which helps them. They are going to throw off about $50 million in cash, which allows them to buy more assets and more franchises. He expects they will be diversifying out of the Alberta area in the next little while. Dividend yield of 1.67%. (Analysts’ price target is $27.)

The stock did extremely well, and then they did a financing and the stock came off. Oil prices had come off and most of their dealerships were in Alberta. They’ve been consolidating quite a bit. Has traded sideways for about 1.5 years. When things start to come back, these guys will garner a higher multiple. Also, they are the only way to play the auto dealership sector in Canada.

(A Top Pick April 27/16. Up 10%.) A little too volatile for his liking. The only multi-dealership auto publicly traded company. They are perceived to be predominantly Alberta-based, and have to continue to move over to the GTA, which will be the key focus for their growth going forward.

It fell a lot because of Western Canadian exposure. Management was going to do 3-5 acquisitions per year and then did 14 in one year. As things fell apart they did not integrate their acquisitions well. Now they have done this and they have integrated their back office as well, making it easier to integrate acquisitions in the future. Albertans are big spenders on cars. (Analysts’ target: $25.71).

This fell apart over several years, simply because they were in BC and Alberta during the hard time. Secondly it is supposed to be a growth by acquisition story and they were buying 2-3 dealerships a year, but 1 year they did 15 dealerships, way too many. Also, they didn’t really integrate their back-office effectively. New management came in and are committed to making only 2-3 acquisitions a year. A good story at these levels, and it should continue to do well. Dividend yield of 1.55%. (Analysts’ price target is $24.25.)

This has sales, servicing as well as financing, and is a very good business in the long run. Old management made too many acquisitions and didn’t integrate them properly. Because of this, the stock collapsed. New management came in and are committed to making acquisitions, but only 2 or 3 a year. They are also trying to diversify out of BC and Alberta. Throws up about $50 million a year in free cash, and thinks they will be able to use that for acquisitions. Dividend yield of 1.72%. (Analysts’ price target is $24.25.)

(Market Call Minute.) Continues to be in a tough situation and they have to keep buying, so he would stay away.

Canada’s largest retailer of automobiles, using somewhat of a rollup strategy. Western based retailer, with almost 50% of sales exposure in Alberta, which explains the meltdown in the last 2 years. The chart looks like it is starting to bottom, but he is still on the sidelines. Wait until next year before getting involved.

A stock that ran up from literally nothing to almost $90. They bought a lot of auto dealerships. Dealerships make lots of money, because they sell a lot of other products as well. The company did 14 acquisitions in one year, but never integrated them properly, so the stock collapsed. New management has come in and are integrating them properly, and only doing 2-3 acquisitions a year. Trading at 12X earnings. Dividend yield of 1.97%. (Analysts’ price target is $24.25.)