Hudson Bay Co. (HBC.TO)

Likes that they are doing more of what Canadian companies should be doing. Many of our major companies through the years have been bought up by foreign companies. This is the oldest company in the Western world, and has taken over Saks Fifth Avenue. This is a tough business. Saks has not done as well had been hoped, but Hudson’s Bay did triple its earnings in the last release. The street had expected larger earnings though. Thinks there are still some risks in the stock, but feels they are doing some things really right.

This has been a Short for him. It has poor price momentum and valuation is in the bottom 10% for him. Core operations are not great. Has always been a real estate play that has yet to pan out. Also, has a fair amount of debt.

The quarterly earnings just reported were fine. They took their guidance for the coming year up a little higher on sales. This is a great story. It has an asset value of north of $30 easily, and you could even argue in the $35-$40 range. The real estate assets are worth more than the stock price today.

(A Top Pick Jan 30/15. Down 16.99%.) Retail had skipped lower, but thinks they are doing everything right. Has been buying more into this downturn.

Doesn’t go to the Bay that often, so it is hard to get excited. Shopping is going more and more online. People are getting more nervous about the economy. Not something he would want to invest in right now.

Thinks the analysts overwhelmingly like the stock. They’ve done a great job, particularly on the real estate. Have a great focus strategy. Successful in bringing premium brands to the country. Department stores are struggling. Overall the stock is a good stock and the company has good fundamentals. Doesn’t like the sector right now.

What is nice is that they haven’t spun the real estate off into a REIT, but have gone into direct partnership with Simon properties and Germany, in order to enhance and bring on the value of the real estate. The risk is high end retail and the tougher call. This is a good buy for the real estate alone.

Still a Sell for him. Has a Short on it in all 3 of his funds. It has never been there from a valuation perspective. The retail operation continues to struggle. Occasionally gets a pop because of their real estate asset that is supposed to be spinning into a REIT, but never seems to materialize. Too much debt. 11X EBITDA. Trading at 30X earnings. Very low ROE at about 5%.

The fellow who runs this is up to his eyeballs in his own stock. Also, they have been innovative. The real estate value alone is worth more than where the stock is trading right now. They have Saks come into Canada. Bought one of the largest retailers in Germany. They’re integrating these things and getting synergies out of them. Also, clever enough to go with Internet purchasing and sales have really ramped up in that area.

Likes the fundamentals, but loves what the chart shows. It has come back, but is bouncing already. He thinks there is nothing but upside for this company.

Has been negative on this for a long time, and sort of unfairly. Had thought of this as a department store in Canadian malls. When he looked at what they have done in the US, he was really surprised. Surprised at how little of their sales was actually from Canada now. However, there is so much to choose from, and he would be more interested in converting money to US$ and buying Amazon (AMZN-Q). Retail is so tough. (See Top Picks.)

Sort of the “last department store standing” in Canada. The price has come off which made it attractive to him. Thinks the valuation is largely backstopped by the real estate and they are starting to spin that out. Have done a couple of joint ventures with the real estate in Canada and outside of Canada. They are taking the Saks Fifth Avenue off price, and the off-price retailers have done very well in the US. Expanding that and bringing it into Canada. Also, expanding into Europe. Dividend yield of 0.98%.

You are getting the retail for free. You have someone running it that knows real estate and knows retail. It was hit recently because of a down turn in US retailing. Risk in the next quarter is factored in. It is a better company than it has been in a long, long time.

This is like having 2 faces. One side retail and one side real estate. It looks like it is reasonable value on a real estate basis, and that you are buying the rest of the operations for free. Doesn’t rank really well on a P/E basis as a retailer, but as real estate it looks quite reasonable. Analysts have been increasing their estimates on this. Looks interesting here.

It is on his short term watch list. The market is having trouble valuing it. The asset value is much higher than the stock price. The market is giving it a negative value on the retail side. They do make money. You will make money on it longer term.