Hudson Bay Co. (HBC.TO)

(A Top Pick July 22/14. Up 41.45%.) His thesis was that you are buying a retailer’s operations with improvement and reinvesting in the business. Always felt there was a lot of value in their real estate and that they were going to do something with it. They are looking at a department store in Germany that also has a big real estate holding. Something to keep an eye on for the future.

(Market Call Minute) It hit one of his technical resistance points. It does not look interesting to him.

The uptrend from mid-2014 has been broken this year. He easily sees higher highs and higher lows. Chart shows a former low being taken out, so this looks a little dangerous. He would probably let this play out to see if it could find some support before buying.

This is a company that is always going through some interesting transitions. The Canadian retail sector is going through some very tough times, as our economy is somewhat sluggish. That is the largest driver for this company. He doesn’t see a lot of upside in the near future and it might be a time to say goodbye.

This has gone through quite a few permutations for the last few years. It doesn’t have a well defined seasonal trend. Technically it has been an upward trend since mid-2014, but seems to be peaking out from the middle of April, and is now starting to move to the downside. It could come down to its previous support level of around $21.

Thinks it is on the 5^th inning stretch. Has a $36 target on it and it is going to get there. They are gaining strength in retail and on line, margins are improving. 63% of their earnings come from the US, so they have that FX tailwind. They are plugged into a better consumer in the US with better oil prices. He sees 22% dividend growth and 46% earnings per share growth over the next couple of years.

They have tremendous real estate in every city across the country. You add to that what Saks had and he feels it is a tremendously undervalued company. It is run by someone who is a real estate guy who is really good at surfacing value from real estate.

A retail company, but have been making all their money by monetizing their real estate. She prefers their US properties. Good real estate name. There is more upside.

One reason he likes this is the real estate play, but the big reason is that 63% of their business mix comes from the US. He thinks you will benefit from a stronger US consumer and lower oil. They report in Cdn$, so are going to benefit from the US dollar exposure. Have been doing well in Q3 on their top line growth, bottom line growth and margins. Yield of 0.85%.

This did extremely well over the last year. Had quite a remarkable turnaround in terms of managing to get their sales up. Relative to a lot of other major retailers, their sales per square foot are still quite a bit less. The profitability of the company is something that concerns him. A lot of people have bought in on the momentum on the turnaround. They have more sales, but he is not sure that the margin that those sales are generating will have proportionately greater profits. Multiples are high currently.

He has been amazed at the pop this stock has had. From a fundamental perspective, he has a lot of concerns about the company. They are basically just levering the balance sheet up. For those who have been in this for the last 6 months, good for you. You have made some good money. If he owned, he would Sell it here. This is a company with not great fundamentals. It is just re-setting of the pieces of the puzzle to make it look like it is more valuable than it was 6 months ago.

Has benefited really well from a low growth environment. All retailers have done really well in a falling Cdn$ environment, which typically doesn’t happen. This company, (because of real estate assets and by turning into a REIT), is going up, but is not worth $24 in his opinion. He would not be in this.

Thinks they will spin some of the real estate out into a REIT and may sell the best properties directly, leasing them back. The retail operation is only trading at 4 times. The retail operations are actually improving. The outlook is pretty good. There are some catalysts coming in the next 6-12 months with what they will do with these real estate assets.

Sees this as a way for Canadian investors to benefit from improving US retail. 63% of their business mix is now levered to the US through Saks, Lord & Taylor and Off Fifth. He is modelling 43% revenue growth from merger synergies and higher margins over the next couple of years. The kicker here is that management has said they are going to do something with their real estate between now and next spring. There is a good chance of a growing retailer that is trading at a good level on a PEG ratio basis along with the real estate upside.

Continues to be a very interesting situation. With the backing of a pension fund, they bought Saks. So far that story has been about financial engineering and unlocking value that was there and about the REIT spin out that is probably coming at the end of this year or early next year. If you hold it through the REIT spin out, what do you do? If you continue to hold, you have to be willing to give them the benefit of the doubt that this is going to be a good retail, it was a very bold, ambitious plan to unroll Saks out into the Canadian marketplace. She expects this will be successful.