The Brick Ltd (BRK.TO) Buy, Sell or Hold

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The Brick Ltd (BRK.TO)

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6 watching

DON'T BUY

(Market Call Minute.) Retailer. Consumer spending is going to slow so he would avoid it.

DON'T BUY

Furniture retailer across Canada. Good results from western Canada where the economy is quite strong. A lot of their revenues come from extended warranties. A little concerned about the consumer being weak in most of Canada.

DON'T BUY

The concern with the Brick Group would be consumer spending. Unfortunately, they are positioned in the mid to lower middle-income strata, which is going to feel the pinch. His concern would be with the stability of cash flow over the next couple of years. Also, they will have to convert back in 2011.

COMMENT

Yield of 13.9%. Has had a difficult time raising interest amongst the institutional investors. Real estate has been separated, so what you are buying is essentially a pure play retailer. Given all that is happening in the US housing market, the weakness could transfer to Canadian retailers, particularly southern Ontario. The strength in Western Canada is supporting their Ontario and Quebec cash flow.

BUY

(This is his own fund.) This was the #1 performing fund in Canada last year. Likes the segment of the Brazil, Russia, India and China. The economies of these countries are great places for long-term investors.

SELL

Tried to move up to more expensive furniture and also tries to compete with Sleep Country. Benefited from having most stores in western Canada. Expecting problems in 2008 because of the weakening economy in southern Ontario. Would buy if the price dropped below $9.00.

WEAK BUY

A marginally good place to put money. Has some basis for appreciation here.

HOLD

Have been expanding and are doing fairly well in some of the new markets that they've gone into. They are a competitive force. Has been fairly steady in its ability to pay distributions.

DON'T BUY

National retailer across Canada. Doing OK in western Canada but not as well in central and eastern Canada. Struggling in Québec. Would prefer a better quality retailer.

SELL

Has had a couple of stumbles and could continue to do so. Doing well in Alberta and B.C., but Ontario will come under some pressure. Payout ratio is pretty much 100%. Would take some profits or move money elsewhere.

DON'T BUY

Not spending enough capital, so they reported decent results but are not maintaining their operations. Good operations in the west, but having no difficulty in the east.

DON'T BUY

Furniture retailling started out West and then expanded to Eastern Canada. Retail is a tough business and their margins are paper thin. They make their money in their financing programs. They don't own it and would tend to avoid it.

DON'T BUY

Has concerns that they have a number of businesses in addition to their core Brick stores. They should focus on their core business without distraction of other activities. Distribution is tight.

DON'T BUY

This is a retailer and their cash flow can be variable over time. What worries him on the consumer sector is whether they can maintain the spending patterns that they've had. That is really a big unknown.

HOLD

Doesn’t care for it based on price. A good company and well run, but had some issues since becoming public. Was overpriced. Housing market in Ontario is having a negative affect.

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The Brick Ltd (BRK.TO)