Opinions John O'Connell, CFA
Home Capital GroupHCG.TOCOMMENTApr 21, 2015
John O'Connell, CFAUnknown
$45.90
Stock price when the opinion was issued
$44.26
As of Sep 01, 2023. Market Open.
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DON'T BUY
If you want to own a lender, please own Canadian bank stocks instead. HCG and others don't have the same access to capital, so they can get caught in a liquidity squeeze. Borrowers pay a higher rate of interest. If housing market has a hiccup, HCG would be more exposed than the banks.
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STRONG BUY
A few years ago, it was one of his beloved stocks until it got slammed by comments from the U.S. and OSC. It has since rebounded. Its fair market value is 154% higher than the current price. If it can break out from the current $45 price, this will enjoy a nice upside. They are also buying back a lot of shares, which he thinks is stupid; raise the dividend instead.
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BUY
What is interesting about them is that they came through mortgage hell in 2008 with barely a ripple. It has also emerged from COVID-19 issues with barely a ripple. It is very cheap compared to its long term book value of $45. The fair market value is huge and the balance sheet is fine. He wishes they would institute a dividend that would give investors more comfortable that everything is fine. He thinks deferred mortgage payments will not be an issue for them. In a recovery, it will do very well.
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PAST TOP PICK
(A Top Pick Oct 01/19, Up 41%) He recommended it when it was basing and, as he predicted, it popped. Now, it's peaking, so he expects a 10% pullback, so wait.
Javed MirzaOwned
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BUY ON WEAKNESS
PARTIAL SELL
Recently he took profits, because his cost base was a third of its current price. It's had a tremendous run. The company has come back from its problems a few years ago, thanks to new managers who will continue to do well. He would buy more later. You can take some profits now.
Michael SprungOwned
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Seems to be a large short position. Considering they missed their last 2 earnings, what do you anticipate in the next 6 months? Short sellers aren’t dumb and they’ve done their homework. It is true that this company could get into trouble at some point. This is a bet on the housing market. For most Canadians that have their net worth tied up in housing, it is probably not really necessary for you to double up on your personal portfolio by owning an investment such as this. It has been a very well-run company and has been very profitable. If the housing market continues to perform well and this company continues to execute well, the short Squeeze could cause the stock to pop when short sellers try to cover. Doesn’t think Canadian investors should be making bets on derivative plays associated with the Canadian housing market.