Opinions
James Hodgins
Chesswood Group
CHW-T
DON'T BUY
May 15, 2018
$10.710
Stock price when the opinion was issued
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lodging
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TOP PICK
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).
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TOP PICK
This is another alternative lender which has been transformed over the past two years with a new CEO who has done well diversifying its product offering as well as its funding sources. It is growing very quickly and has bought an auto lending as well as an investment manager business. It is trading at 5X earnings with a 4% dividend. It is small and not well known but will be more noticed over the next few quarters and years. Buy 2, Hold 1, Sell 0 (Analysts’ price target is $19.00)
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PAST TOP PICK
(A Top Pick Jul 11/22, Down 33%)
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.
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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.