Dollarama Inc. (DOL.TO)

It will do better with a stabilized Canadian dollar. It has been tough for it to keep its margins with a strong American dollar. It will go in sync with the Canadian dollar.

It is a simple business of selling things for a dollar or three. It is an expensive multiple for a retailer. It is still growing, but people are questioning whether it is slowing in growth. He would still avoid it even at these prices.

Both medium and long term it is a buy. It did well until early December when they announced their earnings. They were very cautious about guidance into the next quarter and next year. Most of their products are imported and the low CAD$ is causing their cost of goods sold to creep up. They have lots of room for store growth. Dollar stores in the US don’t hold a candle to DOL-T. It is at 22 times earnings.

It is down more than 20% from its peak last year. It broke the trend line. Because it had a high multiple it can correct more than others. He would not step in just yet.

Has been in a great space because it is low cost. The Cdn$ going the way it is, makes it difficult as their margins are getting squeezed. If you have to or want to be in the retail space, this is a pretty good opportunity because it is in a good area. He feels he has a better one. (See Top Picks.)

They continue to have overall good numbers. Earnings estimates have come down. It is too expensive for him. He can buy something more inexpensive. He prefers ATD.B-T. The higher US dollar is hurting DOL-T.

Short? Shorting stocks is really tough. He always looks at 3 things before shorting. 1) General market trend, 2) sentiment towards the stock and 3) is there a catalyst you are betting on. Trading at 28X earnings. If you Short, put stop losses in. He would not Short this one.

Not cheap, which is why it has paused and declined by about 10%. Numbers reported were better than expected. Management indicated the outlook was not quite as rosy because of currency, and they were going to be a little more cautious on their outlook. Trading at 25X 2016 earnings estimates, which are expected to grow at 11%, so you have growth rate of 2.3X. ROE is huge at 65%, but the forecast for 2017 is 15% against a 22% PE.

He does not know the seasonality. The longer term trend was on the upside, but then it broke below a key support level in a head and shoulders pattern. This is not good news. There is support around $73. It is below its 20 day moving average. You don’t want to be in this stock. Take some money off the table.

We have a defined uptrend that we have violated. The volume increased at a peak. It is now going down on high volume. He would be cautious. It is an overcrowded space. Investors were piling into it. The high US dollar is impacting them.

This has a super long uptrend. It got parabolic and it is inevitable that this will pull back. It is currently getting closer to its long-term trend line and seems to be finding support, but could go a little bit lower. Watch for support as there is a possible opportunity. Wait to see if it finds support and then it could be a good buy.

Stock vs. Stock. ATD.B vs. DOL-T. They have both done extremely well and are priced for perfection. DOL-T has warned that the high US dollar is impacting their cost of goods sold. These two stocks are very expensive and to move the needle they have grow a lot more. He would take the money from these and plow it into companies he is recommending today.

DOL-T vs. CTC.A-T. Both have been very good retailing stories for the last number of years. CTC.A-T has had a real estate portion to their story. They trade cheaper and are the slightly better story. He does not buy stocks at the PE of DOL-T.

The numbers were great in the headline news; they beat on cash flow and margins were up. Going a little bit deeper into guidance for next year, they are guiding for not as many store openings and for growth margin to be in the bottom end of the range. Also, with markets being jittery, the stock has been one of the real darlings and a good opportunity for people who are nervous to raise some cash at year-end. If the stock pulled back, this would be a real opportunity, especially in this slowing economic environment where people are more likely to shop at a Dollar Store.

Really well run retailer. He finds it expensive. As long as these retailers are executing and earnings estimates go up, then the stock will continue to go up.