AutoCanada Inc. (ACQ.TO)

This is in a tough position. They are facing a battle on 2 fronts. One is “peak auto” and the other is Alberta weakness. They are trying to deal with the Alberta concentration by diversifying into areas like Ontario. If you are a long-term value investor, this is interesting. He is a bit worried about the debt, which he thinks is getting high, so would like to see some active pay down on their debt load. If you are patient, this should do well over a 3-5 year timeframe. However, if impatient and want more growth, you are probably okay to leave it.

You have to be careful with car stocks, because the consensus is that we are getting late in the cycle. Even though no one is expecting car sales to plummet, they have probably peaked for the cycle. This company has a lot of exposure in Alberta and Saskatchewan, and to Chrysler and Fiat. It has the wrong geographic mix and the wrong car mix. She has been Short this for a while.

Alberta is the best auto market in all of Canada. They sell a lot of expensive pickup trucks. With oils’ protracted downturn in the oil/gas industry, he thinks it is going to have continued impact on this company. They are trying to diversify by picking up dealerships outside of Alberta, but he still thinks there is a big overhang on the stock.

A very, very impressive stock for a number of years, but is very over indexed to Alberta. It peaked at close to $100 in 2014. Very inexpensive. Also, it is a growth by acquisition story so the bigger they get, the more they are going to need to do bigger and larger and more frequent deals. He would tend to err on the side of waiting for more financial proof that they are back in gear and growing their earnings once more.

(A Top Pick August 17/15. Down 13.18%.) Has been a bit of a disappointing year, but he is still quite excited about it. It has a great runway for growth in that they can purchase auto dealerships that are relatively decentralized, and that people are more likely to service cars at dealers because of the increased technology in cars.

This was a darling through 2012-2014, and then it collapsed, and everybody thought they would never sell another car again. The stock now seems to be putting in a base. There are a lot of Alberta fears built into this. The company is not going bankrupt. This is probably an OK entry point. An interesting name to play for an Alberta recovery as well as a growing business. This is the game for auto dealership franchises in Canada.

An interesting business, and have done a very good job of consolidating a lot of car dealerships around the country. A significant concentration of these is in Alberta. The recent downturn in Alberta, and the challenges for the consumer, along with unemployment is a near term headwind. The share price has had a significant correction, but there has also been a drastic decline in the company’s earnings power. The maintenance side of their business is a more recurring and stable part of their business, generating somewhere in the neighbourhood of $1.50 a share in earnings. If you put a 10X multiple on it, that would mean a stock at $15 would be giving you the new car business for free.

One of the few publicly traded auto dealerships. Grew very quickly through aggressive acquisitions. Have come down a long way because of their 40% exposure in Alberta. Still in a transition period. If you believe, as he does, that oil prices will rebound there should be a stabilization in the sales in Alberta, and the rest of their business should show through. Feels the downside is minimal and there should be some upside.

This was a darling of the retail community. A big yielding stock, a rollup story, equity issuance. It worked great until it stopped working. Got caught off side with significant properties in Alberta. Believes we are starting to see a bottom here. Still doesn’t find it tremendously cheap. Wait to see if there is another leg down in the market.

If you were to chart out oil prices against this name, you would see quite a bit of a correlation, because this is looked at as being a Western company. Thinks this is all baked into the price. Dividend yield of 4.69%, and the balance sheet is sufficient enough to cover that in the near term.

Hold or Sell? Made a lot of money Shorting this in the last 2 years. With what is happening in Alberta, it is going to take a bit of a turnaround before you actually see people buying a lot more pickup trucks. Be very cautious in the next 12 months.

Canada’s largest auto retailer. They rollup auto dealerships. At this point he would not recommend it. This is a good consolidation play longer-term, but unfortunately almost half their exposure is in Alberta. Considers this as a value trap at this time.

This company has an issue. Have a huge concentration of car dealerships in Alberta. The stock has not done well, so they can’t really use the stock to make acquisitions. Not generating a lot of cash flows, because the earnings and cash flow come from Alberta. They are kind of stuck. Wouldn’t buy the stock until there is a bottoming in the Alberta economy.

It is still sloping down. People are worried about Alberta. They have been growing. You have to have the turnaround in Alberta to get the fire under this stock. You have to be patient.

People are concerned about declining car sales and about the ability for lenders to be happy to lease or loan for autos. Most recent earnings were down and forecasted lower this year. If they deliver earnings growth it is a good deal. He is cautious on whether they can deliver good earnings.