DH Corporation (DH.TO)

A lot of negativity in this name. From the numbers today, they knocked it out of the park and management will be pleased that they can now get all the naysayers to cover their Shorts pretty aggressively. Be careful of this on the opening, because there are a lot of Shorts and it can spike pretty high and then check back.

Essentially a back office for financial institutions. Recently made acquisitions in the US that gives them growth. About 3 months ago a Short seller advised that they were playing fast and loose with revenue recognition and not making any money in the US. The stock dropped very quickly. The only way to disprove the Short Seller’s report is to show the numbers over the next 2-3 quarters. 5% organic growth and a lot of cross-selling opportunities. Incredibly cheap at 14X earnings. Dividend yield of 4.07%.

Has been a controversial name. A report came out alleging they had overpaid for some acquisitions and were going to lose some customers and face some pricing pressures. Ever since that came out, it has been in the penalty box. Management has reasserted that fundamentally the business is okay, pricing is fine and they are not losing any customers. Before Buying wait until they report on Feb 23rd. Longer-term, this is a stock that could be worth upwards of $40.

The problem is that they went and bought a company in the US, but it was too big. It corrected his model price to $32.50. It is a growth story, but DH is no longer a growth story. It is now an interest rate play with a 4% distribution. It has a 4% upside also.

Service a lot of the financial industry in several business lines. Thinks people are concerned lately about some of their movements into more technology-related lines where multiples are quite high and assets are not quite so tangible. He has a hard time valuing this. Trading at around 12-13 times earnings. They are making a big bet on financial technology, but are up against some very big players. Wouldn’t be a buyer at this time.

The recent history was rather upsetting. It started off some months ago when somebody came out and said their accounting was wanting. The stock immediately went down 17%-20%. Then they came out with an earnings decline of 25%-27%, which hit the stock. Trading at a relatively high multiple. He is waiting to see what happens in the next quarter or so. The yield is 4%, and he doesn’t think there is any problem with the dividend.

Over 60% of earnings are coming from the US. Sintech was an accretive acquisition for them. You’re getting a big US currency translation. A short seller came to town on the back of Valeant when the Canadian public was very susceptible, and this was good for about a $10 drop. Management met every allegation head on. If the markets are good, this is definitely a name you want to be picking away at.

He considers this is definitely a long-term hold. Good cash flow business in Canada and investing that money into the US. Have made some good US acquisitions that will grow over time. Balance sheet is a little stretched right now, but they will grow back into that.

It has come off quite a bit. It keeps on doing what it is doing. They are the back office of many financial institutions in North America. It got hit by a short seller who thought their accounting was aggressive. He does not believe this is true and so it is a great buying opportunity. The insiders were big buyers recently.

It’s borderline in the top 3^rd of his database. Earnings are forecast to grow by a modest 7% this year and next. His guess is that the stock is going to tread water and you are better to consider selling and moving on to something better in the dividend paying world. 4.1% dividend yield.

In the short term, you can go ahead and take a tax loss. It doesn’t look like a stock that needs to be owned today. However, it did have an unbelievable run which was great, and now there is a consolidation. It had its 1^st bounce and in an area where there has been no reason for it to bounce. This is maybe something he would Sell and then get back in, in the new year

It has come down a lot and they made a lot of acquisitions and have a lot of debt. There are a lot of evolving products. He would hang on to it. They are a well managed company. They are going to do well, have good assets and good management.

Has a Put option for Dec $34, and the short Sellers drove it down. Normally would roll this over to the next month, maybe Jan $32, but thinking he will let the stock be Put to him and Selling a Call 6 months from now. Answer: The caller sold a Put Option on the stock, which is a very steady interesting cash flow business. When selling a Put, you are taking an obligation to buy the stock. In this case he sold a $34 Put and was saying that he was willing to buy the stock at $34 a share until the Put expires this month. It is trading below $34, so he is going to be Put the stock and is going to own it. Because he now owns the stock he is asking if he should Sell a Call option that gives him the obligation to deliver his shares to the person who bought the option, at probably a $34 Strike Price. This is a fine strategy.

Made an acquisition of Fundtech, which then had a big Short Seller report. This all happened in the same week as the Valeant (VRX-T) Short Seller report, and a lot of people vacated the name. He had owned this, but didn’t like where it was going. Just felt that the tune was going to change with the Short Seller report, and it got him out of the stock. He will be happy to come back, but is going to need a little bit of distance because of the negative air on it. This has completely transformed itself from a cheque writing company into a fintec. Something he would be interested in getting back into at sometime down the road.

It has its roots in the cheque printing business, but has diversified away from that. They provide a lot of technology for many of the regional banks in the US. They have been a consolidator, but those have come under pressure. There are concerns as we need to get more clarification. Next Feb. we get another release of earnings. Insiders are buying their stock so that is a good sign.