Alcanna (CLIQ.TO)

ACB paid a premium to the market price, hoping that it will become a distributor. That has not happened yet. The market price has not risen to the price ACB paid. This company is a former income trust. Like all other income trusts, they neglected their CAPEX. Their starting to do maintenance on their stores now, making them look better. The new management team will spend a lot of money on this. It will be messy for several quarters. Longer term, after they clean up their stores and the Alberta economy picks up again, will be a good holding. The dividend is not high enough to make the stock exciting for investors while they wait, so he doesn’t own it, but if he did own it, he wouldn’t be in a rush to sell it. If they do start to distribute marijuana, the stock will pop.

Their core liquor business is in turnaround mode, run by new management who are doing all the right things. They are focusing on private labels. They have been renovating their stores, they plan to open up to 50 new stores this year in Alberta and BC, liquor retailing is a good steady business as it is, which is good for this point in the business cycle, and they expect to increase sales with cannabis next year. They received a strategic investment from Aurora Cannabis, which now owns 20% of the company and will buy another 5% for $15 per share even though the company trades under $10 today. The western provinces are talking about privately owned cannabis stores, so the opportunity for them to move into this business in a big way is realistic. (Analysts’ price target is 13.10$)

Is this a buy over the next 1-2 years? He thinks the buy in by Aurora was interesting. Their existing business is going through transformation and they are working at trying to improve on or sell assets – especially in Alberta. He is on the fringe of wanting to own it.

He likes liquor retailing in general and Alberta has been in the dumps. However, there’ve been a number of things happening. There was a proxy contest the new management and the board put in place. Feels new management is doing a good job. They've sold some US assets off. They are using those proceeds to pay down debt and reinvesting in their tired store base in Alberta. They’re the largest player in Alberta and it is a pretty lucrative market. If there is any improvement, in oil prices and the Alberta economy, such as there has been recently, this company is poised to benefit. There’s been some speculation, that because of the large number of stores in Alberta, there are opportunities for them to benefit from converting some into cannabis stores. Dividend yield of 3%. (Analysts' price target is $11.88.)

When they went public he thought it was a great concept – publically owned liquor stores, but it has not done much. Cannabis would give it a bit of a lift but for now it is an income play. You won’t make a lot of money. You can do better with a telco, pipeline or bank.

He said several years ago to stay away because they needed such renovation of their stores. They are now reestablishing their western Canada presence and selling off their US stores. Cannabis may or may not be the savior of the stores.

(A Top Pick Sept 9/16. Down 3.09%.) This was a kind of bet on a recovery in Alberta, because that is where most of their stores are. Has added more, because in the interim, they had a proxy battle and brought in new management and new directors. Pays a dividend of about 4%. At some point he thinks oil is going to recover. Also, what if they get a mandate in Alberta to sell marijuana like they did in Ontario. There could be some interesting upside here. Still a Buy.

This is a pretty good steady business. It has a dominant position in Alberta and a very nice business in British Columbia. The recent quarter showed they had some struggles in their smaller US business. The new management and board are doing the right things. They are trying to improve inventory turns, putting money into revamping their very large store base in Alberta. All of those changes should lead to a leaner cost structure, and improve margins in their Canadian store base. Thinks there is potentially a $14-$15 share price over the next couple of years.

(Top Pick Sep 9/16, Down 13.38%) Alberta is not picking up any faster than anyone thought and then there was a proxy battle and the old management is selling off their stock. They could get rid of their US assets and concentrate on Alberta.

It is not in its hay day right now. That was in 2010. Every year their return on capital keeps getting worse.

(A Top Pick March 30/16. Up 38%.) This benefited from the recovery last year in oil prices. He is less interested now because there are some operational issues they are working through.

(A Top Pick April 11/16. Up 34%.) Liquor retailing is a pretty good business. Performance over the last 4-5 years has been substandard, and feels the current management team has mismanaged the business in some ways. Also, there has been an escalation in costs which has led to higher operating expenses as a percentage of sales. There are a lot of things with the business that can be done to improve it.

(Top Pick Mar 30/16, Up 26%) It was challenged this time last year. It was taking it on the chin. It has turned a corner, but still has some negative same store sales out West. They need to see a turning point there to get the stock above $10. As time goes on it will happen.

This looks pretty range bound and currently at a level where he would be a seller. There is a good support line somewhere around $8, and it has currently been stuck in a range for about 6-7 months. Volumes have been dwindling.

They have a lot of Cap-x to renovate stores and sure enough they had to cut the dividend. Same store sales are struggling. There is competition. They are trying to launch their own brands, but that is tough. You want to watch same store sales and how much they have to reinvest in the business to stay competitive.