AutoCanada Inc. (ACQ.TO)

Hit a high of about $90 midyear, and was very expensive at those levels. Got involved with this in the 4^th quarter of last year at around $50. Great company. It collapsed in January down to the low $30s, at which point it was trading at around 10X earnings and growing at about 45%. Up about 50% this month from the bottom. Has had a massive bounce off the bottom. At $48, it is trading at about 14X this year’s earnings. He still likes the company. Has trimmed his holdings modestly in the last 2.5 weeks, but he likes it a lot.

An aggregator of auto dealerships. They were going great guns until around June-July. The pullback is strictly related to the decline in oil prices. About 50% of their acquisitions have been in Alberta. People in Alberta are not buying houses and are not buying pickups. Market probably overreacted on the 1^st downside, but there is still a pretty big open question as to whether these auto dealerships end up operating at a loss. He wants to see how far Alberta compacts before getting interested.

This basically owns auto dealerships across Canada, and their growth strategy is basically rolling up dealerships. Overexposed in Western Canada, so there could be a big slowdown there. He can see it continuing to be under pressure until there is more visibility on what is going to happen out West.

A wonderful operator. The reality is that the dealerships are centered in Western Canada. It will be tough for them to just maintain sales.

The only publicly traded company in Canada that is an auto dealership consolidator. Has done very well but pulled back late in the year. Have built a very good model in terms of integrating acquisitions. A couple of auto firms have not permitted their dealerships to be sold to this company, but it looks like there is some change taking place, which should be a big tailwind for this company. Very strong management team. Good, long term growth potential.

The type of name that she probably wouldn’t own. It has pulled back a lot. This is growth through acquisition of auto dealerships, so it is predicated upon them growing through financing, etc. They are overly exposed to Western Canada, and there is a concern that business will weaken there. Feels it is not trading low enough, and she doesn’t see auto dealerships as a strong secular growth area.

This way overshot his FMV calculation, which was kind of extreme for what he would term as a cyclical stock. It has paid the price recently. Looks like there was good support at around $36, and even here at $45 it has good potential on the upside. He would be looking to buy this at around $36-$37.

Had a huge run up to over $90 and corrected back to $41.85. In western based automotive businesses, people are worried about what that does for the future and they need to see where oil/gas is going to steady up at. This is a company that he is now planning visits with in order to meet management. He could very well become a buyer of this in a few months time.

Stock price has done extremely well, but has probably got a little ahead of itself. Everybody is now asking about their exposure to Western Canada. It is quite a bit. Feels the recent fall is because it rose too fast and too quickly. Probably trading at a pretty fair valuation now. He likes what they are doing, but keep in mind that any of these consolidation plays eventually run out of steam and don’t always end well. The trend of a family owned dealership looking for an exit strategy, probably has another good 5 or 6 years. Definitely interested in getting back into this when he has cash available to do so.

45 dealerships across Canada. They are the largest publically traded dealership company. 70% of dealers want to be out of the business within 10 years. They are expanding outside of Alberta. When they take over, they implement their best practices to increase profits and cash flow. He has been thinking about buying it. He is waiting for it to stabilize.

Before the current stock price drop, there were a number of issues. The value is now really starting to show up. For the majority of the year and even into last year, this was a stock that was always priced at a premium because they had such a high growth rate. The growth rate hasn’t stopped, but they have certainly come into line with their peers. The 2015 estimates are trading significantly cheaper than a lot of their peers. Have a very high exposure in Alberta which is part of the reason for the drop in the stock. However, new vehicle sales make up a big portion of their revenue, but from an EBITDA earnings standpoint, it doesn’t make up as much as you would think. It is only about 26%-27% of that. Basically down in price from what it was a year ago, and they have acquired over 15 dealerships, including their 2 largest in Québec. Starting to diversify outside of Alberta. There is lots of room for them to keep acquiring. If you have a longer-term time horizon you could get invested now.

This is an acquisition story where they buy up dealerships. A high multiple stock, and a pullback is what tends to happen when there is a slight earnings miss. Also, this is fairly concentrated in Western Canada, so there could be concerns about lower economies in the western provinces. Trades at a very high multiple.

Auto dealerships. Great company, but looking at the share price, it has had a tough go since June-July. There have been a lot of expectations built into the stock. Multiples were high, and when it didn't deliver on earnings, the stock really got hit. The landscape is becoming a little bit more competitive. Company is fine, but we need to see more consistent earnings growth. He would be a little bit valuation sensitive on this, but longer term it is fine.

Overall he thinks the easy money has been made. The recent report in the last quarter signals warning signs. Average selling price in dealerships has been coming down. He can see some correction here. There is still a huge runway to consolidate dealerships in this country. 14 acquisitions year to date. Dividend increase recently. It is not impossible to see this name revisit an $80 level. But it looks now like a falling knife.

Just came out with earnings and the shares dropped significantly. Likes this sector. Some very, very deep pocketed wealthy investors have been accumulating auto dealerships. There is a generational change going on, where a lot of dealerships are owned by boomers who are getting to the age where they want to exit. This will be a big turnover, which will benefit this company. Also, sees car sales continuing strong.