Peter Hodson Chesswood Group CHW-T COMMENT Aug 03, 2016

(Top Pick Feb 24/17, Up 3.56%) A Top Pick again. The growth rate remained great and they are a potential take out candidate.

Small ticket equipment leasing to US companies. They have a top management team that can manage risks as well as the company. It has a 6.7% dividend that is sustainable and could be raised. They are a prime takeout candidate for major financial services companies. (Analysts’ target: $15.50).

They are involved in small equipment leasing, which historically has correlated with auto leasing. He is negative on the prospects for auto leasing and is concerned about the prospects for Chesswood’s funding sources. The dividend is high but the payout ratio is around 50% so he thinks the dividend is reasonably safe. However, this could come under pressure in the future.

Public company that originally was a car leasing business.
Recently pivoted into equipment leasing business.
Diversified lending company.
Growing at a strong pace.
20% return on capital with strong dividend.
Great long term investment.

Last year, profits were way up, but suddenly Q1 was disappointing. They took a large provision for loan losses and their costs have shot up. So, they slashed profits. Pays a 7% dividend, and shares are cheap. He has trimmed his holding. Look elsewhere.

It is a good business, well run with steady insider buying. Profits have been hurt by financing costs since there is a lot of floating rate debt.

The U.S. side of the business became weak last year. It is mostly equipment leasing as well vehicle financing. There is an ongoing strategic review. He considers it OK but there are better places to be in the finance sector.