Canadian Tire Corporation Ltd (CTC.TO)

Facing a 20% loss. Sell? It's missed earnings in 5 of the last 7 quarters, and it's exposed to the consumer discretionary space, which is vulnerable in a downturn. Also, it's vulnerable to Amazon. Their chart is making lower highs and lows as the TSX is moving the opposite direction. It isn't cheap, trading at 2.4x book value vs. 1.7x historic average. Also, past major downturns fell 60%.

Well-run retailer, but he's concenered with outside disruption, a digital competitor. It could happen. In retail, he considers the future. They have a decent balance sheet though.

One of the few great Canadian retail stocks. There's support below current levels. When a quality stock is down 10-20%, then buy more. Buy if you can't do that, then maybe you shouldn't be owning it in the first place.

This is a great company. When WalMart entered Canada, they considered Canadian Tire the one company that was unassailable. They’ve done a good job of diversifying and of controlling the sports business in Canada. Their business model--control small-town Canada--has been very dependable. However, they are dependent on external factors. For example, it has to snow enough for them to sell snow-seasonal items. The stock has done very well over the past 5 years. He sees no reason not to own it, but he wouldn’t buy more. It costs too much.

The stock has done well, but its growth is limited by limited Canadian consumer spending. He owns Loblaws and Leons instead. He thinks the valuation is too expensive at this level.

It's a decent long-term hold. A good operator. The debt-ridden Canadian consumer makes him nervous, so he's avoiding this space for now. As interest rates rise, consumers may spend less at Canadian Tire. The stock has been underperforming. There could be an entry point in the fall.

(A Top Pick February 22/18 Down 6%) The Helly-Hansen acquisition has brought headwinds to this stock. They have made acquisitions in the past, but this seemed strange and very expensive. The seasonal peak for this stock is January 11 to April 12, so he would not hold this now.

[What is P/B, like Canadian Tire's?] P/B is the price of the stock against its accounting book value, the money that's gone into creating the existing company. Some say it's an historic measure which get distorted over time, like a factory they own that's greatly appreciated in value. He uses it to measure how management uses shareholders' money, but you must also look at P/E and ROE. Canadian Tire is selling at a higher historic P/B because it's done so well, especially in the face of Home Depot and Walmart. They may have challenges online battling Amazon. Would like to see Canadian Tire at a lower P/B perhaps between 1.5x and 2.5.

It’s one of the few names in the retail space that has done quite well despite the current challenges to bricks and mortar. Their share price has outperformed the TSX since 2010-2011. They have diversified, with Canadian Tire stores generating 65% of sales, FGL Sports generating about 20% and Marks generating 15%. They have lots of cash,they have slowly loosened up the purse strings by raising the dividend and they have a very healthy balance sheet.

The season period is January to Mid-April. It was in an ascending bullish triangle and then it popped when they came out with great earnings. This is very positive. It has still has room to move higher.

He tends not to ‘step into traffic’ and initiate new positions before important news releases. Wait for the earnings. We have seen two or three months of very weak Canadian retail sales growth and so the stock has come down.