Opinions
Kash Pashootan
Home Capital Group
HCG-T
DON'T BUY
Nov 01, 2017
$13.830
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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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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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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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You have to ask yourself why you are buying this. Is it for the yield or share price appreciation? If the yield, there are a lot of other places where you could get a similar yield, or even a better one. On share price appreciation, there is a lot of risk. If you are okay with the speculative nature, then maybe take a half position and hope to strike it right before things turn around. There are still lots of questions on this stock in terms of the business itself. Also, they are in a sector that is feeling pressure from rising interest rates, high household levels of debt. He wouldn't be a buyer. Keep it boring and get a lot of safety at the same time by looking at Canadian banks, or even the US banks.