Hudson Bay Co. (HBC.TO)

He is looking for a retailer whose name has been bantered about. Late last year it started having some shareholder activists that thought the stock was way undervalued to what it owns. It broke $10 a couple of times late last year. It is $11 now, and he believes it is $15 easy, even if nothing happens with it. (Analysts' price target is $12.00.)

Has been hearing about their real estate value for years. The hedge funds are saying this $10 stock has $31 of value if they do something with the real estate valuation. He is not sure how long investors are willing to wait. Meanwhile, the retail business and industry are not doing very well at all. They really have to get it together. Either do something with the real estate, or not. He doesn't like recommending companies that "might" do something.

This is basically a bet on real estate. Can they realize the value on their real estate? On the retail side, they have a lot of debt. Just reported negative earnings.

A very interesting story because it kind of represents a “push me-pull me” situation. They have spent a lot of time building what they’ve got, and outside hedge funds are seeing about $35 of value, which is not being represented by the stock price. Thinks the company will resist selling assets unnecessarily, except for what they need to support the balance sheet. An interesting speculation and you are just going to have to wait and see.

Richard Baker is regarded as the best man in the ghastly department store sector. Had a meeting about a month ago and it was intriguing to hear him talk. He is very creative, and expected to create more things. Dividend yield of 0.4%. (Analysts’ price target is $13.75.)

Retail has not done well. Eaton’s used to be the largest retailer on the face of the earth. Retail then was very different than the way it is done now. You have to look at AMZN-Q. He thinks, however, HBC-T will do relatively well this season.

This is basically about the real estate. A controversial call, as the company is bleeding cash and they have high debt, so why would you own it. Their land and buildings are going to start to push the button a little, to get the difference between what it is trading at and what the real estate value is. Dividend yield of 0.4%. (Analysts' price target is $13.75.)

The chart is showing consolidation. It is finding a lid and is possibly finding a floor. He wouldn't buy this unless it breaks the $12-$13 level. If it breaks out to the upside on some volume, he would be interested. It has stopped going down, so the downtrend is over.

It is a tricky one. He has been a shareholder in the past. He recommends staying away because it is a complicated situation. He questions issuing equity that is dilutive if there was so much value in their real estate. If the retail business can’t afford to pay the rent eventually then it does not substantiate the value on those properties.

Thinks this probably should be bought here. Thinks it is a nice, patient Hold.

Has added to his holdings in the last couple of months. He understands how bad retail is because of Amazon competition. On the other hand, it is too hard for him to ignore what the potential valuation is on the real estate side. If there is $30 worth of real estate assets, they are going to find a way to surface it. The risk/reward is pretty good.

This one is hard. Missed on Q2 again, where they missed $.90. Margin compression was an issue again. There are headwinds for retail, especially for department stores. However Saks did beat their best comp in 2 years. HBC also had some pretty good comps. There are better trends in retail so far for Q3, and there is optimism for the 2^nd half. This is a risky name. It is very hard to model, as they don’t have any clear earnings path. When stocks are really hard to model, often they are the best buy.

Seasonality doesn’t really apply, because they have been going under a major restructuring. Fundamental analysts say it has real estate value at around $35 a share, and is currently trading at $12.75. There have been some activist investors trying to get the company to do something with the assets, such as capitalizing them and making them into condos. During the last couple of days, the stock has been in a trading range, and yesterday it broke above that base building pattern, for the 1^st time in 6 months, which is very, very bullish. He would guess that there are some activist investors behind this scenario that are boosting the value of the stocks.

Thinks it will be quite a while before they actually close their doors. It is one of the stocks he has been lucky on in that he got out at $17. Wonders how department stores can create a new formula for their existence. The real estate is important, and you can buy this for a recovery on sheer speculation that it goes up later. The underlying value of the real estate is quite substantial.

This is such a sectoral challenged business being a department store. A lot has been discussed about its valuable real estate, but at the end of the day it’s the stores they are operating that cannot afford the lease payments to be in those prime locations. Ultimately, at some point, the model breaks down.