Hudson Bay Co. (HBC.TO)

The big thing with this is its Sak’s acquisition that has “stay-at-home” growth. On the operational side, this might be some improvement. Real estate spin out might be nice, but frankly you want the underlying business to actually be working okay.

From a risk/reward standpoint, the chart shows a low at about $15.80. There is a long downtrend from the end of December, but has not gone through the $15.80. Has actually popped up a bit. The higher lows is pretty good, but we are probably going to get a little bit of backlash with a little bit of resistance at $16.40. There are probably better places to be than retail.

Doesn’t love department stores, but this is a unique opportunity. There are 3 really prominent retail brands under this company, The Bay, Lord & Taylor and Saks. This is run by the real estate Baker family, and the real opportunity here is the monetization and the hidden value of the real estate. $5.5-$6 billion enterprise value company. Thinks the real estate alone could be worth $4 billion, which means you are buying the retail operation for about 3X enterprise value to EBIDA, a very depressed multiple yield of 1.2%.

There was the whole REIT transactions with retailers last year, which got them bid up, and then it fell apart. Also, 2^nd half of the business cycle tends to be energy prices going up, which is not good for the consumer.

(A Top Pick March 21/13. Up 22.06%.) They bought Saks Fifth Avenue and own Lord & Taylor and have real estate that is probably worth more than the share price. Fundamentally there is huge value in the real estate, which is your safety net. They turned around Hudson Bay and they need to turn around Lord & Taylor and need to integrate Saks into Canada. He thinks this is going to happen.

Doesn’t like the retail sector right now. You’re looking at a lot more competition in Canada. This company has a bit of restructuring and had an equity raise, but looking at the growth in the industry, big box retail in general is squeezing out a lot of these companies. Earnings were disappointing last year and the margins are under pressure.

Real management team that brought this company back into the market. They have the strategy right. The real estate portfolio is going to be monetized and fetch about $2-3 billion in value. Sachs is going to be another tail wind to this company due to US$ strength.

Ranging from $14-$20, which is a large range for a retailer?

Bonnie Brooks is president/CEO of the Bay. One of the best retailers in Canada and in North America and the best real estate assets. With the brands she is putting into stores she will pull customers. Also, hold Lord and Taylor in the US.

Would want to wait to see a few quarters to see how they do.

Recently went public. Threats from US retailers makes him nervous to own HBC.

We still haven’t got a winner here. They haven’t given enough data to know if it is valued correctly. Target bought the best Zellers locations and is a competitor. Have you ever gone to The Bay and bought anything full price? Customer base is set on buying whatever is currently on sale. This is the fundamental problem with Hudson’s Bay company.