AutoCanada Inc. (ACQ.TO)

1^st quarter numbers were not as bad as the street expected, which is why we are seeing an upsurge. Seasonally they should be coming into a stronger quarter. They also expect to close some acquisitions. The issue he has is that it is still trading at too high a multiple. 44% of their earnings come out of Western Canada, mostly Alberta, and we are unlikely to see $100 oil in the next few years, so he thinks the pace of acquisitions has to slow down and they have to get more profit out of each store.

Really likes the story. Very well-run. Last year it got to a very high valuation level. Ran into some trouble in the 2^nd half of 2014, when Alberta had its energy problems. It got down to the low $30s and he started accumulating at that time. The outlook is fairly flat for earnings growth this year, but over the next 2 or 3 years he thinks it will have very strong earnings growth. Have a lot of opportunity to make more acquisitions given some of the weakness in Western Canada.

Has never seen the allure of auto dealerships as an asset class, so he has been leery of the stock. It had a great run up until July of last year. From his viewpoint, it has too much exposure to Alberta and Western Canada. Alberta is by far the best auto market in Canada generally. With the circumstances that are happening in the Alberta economy, that is falling off considerably.

A controversial stock and it has been very volatile. Had a huge run over the last few years, and in the last several months it has been quite weak. Part of that has to do with the outlook in Alberta where a significant portion of their dealerships are. Have done a great job of consolidating auto dealerships in Canada. As a long-term proposition, it is probably a pretty interesting stock to look at. With a lower share price, there could be an opportunity here.

(A Top Pick April 23/14. Down 43.48%.) Sold his holdings in October at around $57. Still really likes the business and feels it has probably been punished a little severely because of their Alberta exposure. Still has his eye on it and is very tempted to go back in. He would like to see the numbers stabilize a little.

She thinks they did a massive financing right near the top at around $80. Likes the business model of owning auto dealerships because it is low CapX, and as a result, is high return on investment. There is a demographic shift happening. A lot of auto dealers are owned by baby boomers and they are looking to retire. The next generation, in a lot of cases, do not want to take over the family business. The problem is that this is focused in Alberta. It is going to be under a bit of pressure. If you wait a couple of quarters, you can probably get it cheaper.

Good solid automobile retailer. Probably the biggest owner of auto dealerships in Canada and a consolidator in the industry. Has not done well in the last 6 months, but the longer-term story is still intact. About half of their business is in Alberta, and people are extremely concerned about what is going to happen in 2015 with sales in their Alberta dealerships. Expecting a little more weakness in the stock and thinks it will continue to struggle in the near term. He initiated a very small position.

It’s a good business model. The numbers looked good but the outlook was bleak in the last report. Some of the issue is weather-related (East Coast). They need to do more acquisitions and they need to be outside of Alberta. They may use this opportunity to buy some dealerships that were not going to sell previously. He will add to it eventually.

The stock got massacred. They are in Alberta and people think no one there will buy a car or truck again, which is unlikely to be the case. Car sales are going to go down and people are putting off maintenance. But ACQ-T has dealerships all across Canada, so he thinks it has been oversold. Growing by acquisition can be done by good management and it becomes a good strategy but if you are overpaying and there is no barrier to competitors then you are just a ‘me too’.

(Top Pick Mar 31/14, Down 47.27%) It is probably just the situation in Alberta and out west. He sold at $90 because it became too big in his portfolio.

It is a consumer discretionary stock. The heavy snow in the Maritimes prevented people from getting out and buying cars. The stock also suffered from the oil price because of western Canada exposure. It has some corporate governance issues in that the former CEO who is now the chairman also owns a number of dealerships outside of ACQ-T and some lands that used to be leased from him for dealerships.

(Market Call Minute) middle of the pack in his stock list. A reasonable opportunity this year.

(Top Pick Jun 5/14, Down 53.12%) You don’t hang on to a stock when it starts to trail off and the thesis is no longer valid. The fall off in energy did not help them. They have significant dealer exposure out west. He got out late summer.

Had been trading at a very, very rich multiple. It was kind of an “excuse to go down waiting to happen” and the excuse was Alberta and energy exposure. Margins in car dealerships are not very much on the sale of cars, it’s all on the repair side. This is not one for him. It needs to be mid-$30 before he would take a look at it.

(A Top Pick March 28/14. Down 20.63%.) The majority of their dealerships are in Alberta, so there has been a lot of Shorting and Selling as people are anticipating that Albertans will buy fewer cars in 2015 and earnings will come off the rails. She doesn’t agree with that. Car sales are trending down, but it is not meaningful yet.