DH Corporation (DH.TO) Buy, Sell or Hold

DH Corporation (DH.TO)

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HOLD

Around $22 will be a resistance point. Has good support at around $19, which would be a good place for a Stop Loss. Relative Strength Index is high. If it got to about $22 with a little bit of oomph, you should probably add to your holdings.

TOP PICK

These are the people who print your cheques but this is only about 4% of their business. Have executed a really very impressive business shift. Have gotten into the whole world of claims processing. Also, into supporting banks with a whole set of services. Have been quite profitable. 6% dividend.

BUY ON WEAKNESS

Have diversified away from cheques quite a bit and are now into lending technology, long registration, loan recovery. 4 of the 5 businesses they own in Canada showed improving results in the last quarter. Has run ahead of itself at this point. Would prefer it about 15% lower.

TOP PICK

Name you know when you order cheques. Deal with retail and commercial things for banks. Made some really good acquisitions over the last little while. Considers them as more a technology company in the financial services area. Involved in mortgage technology, applications, etc. that allows banks to use them as a third-party vendor to use the technology when people are on the road. Also, did some really good bolt-on acquisitions in the US. Great yield of almost 6.5%. Trades at about 10X earnings.

WEAK BUY

(Market Call Minute) Pretty good run but still cheap.

TOP PICK

Recently blew away numbers. Expanding into a mortgage platform and into the back office of US lenders. High-margin business. Cheque creation used to be 80% of their business but is now 40%. Although we use less cheques, their fees keep going up and up.

COMMENT

Believes that cheque writing is the core of their business. Most people pay their personal bills through online banking.

HOLD

Have diversified away from just purely cheque printing but it's still provides decent profits and earnings for them. Very solid company and sustainable yield.

TOP PICK

Historically about 90% of revenues came from printing of cheques. This has dropped to 40% of their revenue. There has really been no superior payment option for small businesses. They are moving on towards all kinds of services to banks. Online mortgage applications for US banks. Student loan services, lien registrations and recovery in Canada. 7.1% yield.

TOP PICK

Very good company. It is really kind of a technology servicing stock. Made a couple of good acquisitions in the US that are going to be very fruitful for them. They will be able to do some bolt-on acquisitions after a while. 7% yield. Trades at about 15X earnings. Good buy at this level.

BUY

Feels the cheque business is a fairly stable one. A little more indebted than what they would like to be at this time. A lot of their underlying services business is tied to the real estate/ mortgage businesses both in Canada and US so there are some vulnerabilities. Some of their holdings have a good growth aspect to them. Yield of about 7.5%. Good price. Hasn't bought this one yet but has been sharpening his pencils.

DON'T BUY

This is one of his larger Short positions in his fund. Fewer cheques are being written these days. Have taken on debt to acquire a bunch of tangential businesses. As the cheque printing business shrinks, he doesn't think they will be able to continue to fund both the dividend and the debt payment.

PAST TOP PICK

(A Top Pick Oct 6/11. Up 7.7%.)

WEAK BUY

Pretty well managed company. Generous payout and cash flow that covers it. Revenues came in a little lower than people anticipated last quarter and some expenses were higher than expected. But they also had organic growth in 3 or 4 of their service areas. As a longer-term play it may be a place he would look.

TOP PICK

It’s boring in a good way. They keep raising their prices as volume goes down. They have a great-margin lending business.

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DH Corporation (DH.TO)