Home Capital Group (HCG.TO)

This one always shows up on his radar screen. Looking at managements’ execution over number of years, there are only a handful of management teams in Canada who have executed and generated long-term returns for their investors like this one. This always gets targeted by US investors with a housing bubble in Canada blowing up. With the selloff, this is one that he is looking at.

Has liked this stock for a long time. However, it is closing in on one of his really important technical break points at about $61-$62. At the current price, it still gives you a 20% upside. They have a nice balance sheet.

Has looked at this from time to time. Likes the business. Has had a pretty good run over the last year, so the current dip in the stock could be some profit taking. There are still a lot of people who are very cautious about the Canadian real estate market. Rates this as a Hold here and a Buy on significant weakness.

He likes it. Met with management last week and thinks it is a great long term hold. Largest non-bank company in Canada. They got hit unfairly hard in 2008 and if there is a correction in the markets now, it could take it on the chin again this time. Their guidance was between 13-18%, so he thinks it is a great long term hold. It is pretty fairly valued right now, which is one of his issues with it.

This is not a value stock, so not one that he owns. However, it is a company with a management that he admires very, very much. Earnings go up steadily. Not a risky stock.

(Market Call Minute.) Fantastic management and thinks it goes higher.

Thinks it’s great. Has still been buying at around this price. Great long-term holding.

(A Top Pick May 15/13. Up 82.65%.) Had a 2-for-1 stock split last year. Still likes the company. Earnings are still growing at about 15%. Still sees loan growth.

Really loves the CEO and thinks he is unappreciated. Probably one of the best compounders of capital over the long-term. Company has never issued a share since he has held the stock in 2000. Have grown the capital by organic growth. Unlimited growth because Canada is expanding and they still have a tiny market share of overall mortgages. Continuing to get into new areas of mortgages and other types of landings such as commercial. Have started a financial services arm, Oaken Financial, which is offering GICs, a cheap way to get good capital to continue to expand. Their biggest problem is that demand is slack.

(A Top Pick May 15/13. Up 82.07%.) Had a 2-for-1 stock split. People that don’t like this stock say they are a non-traditional lender. Most customers are self-employed or own their own businesses or not traditional customers. That means they have to actually have humans to use judgment. Loan-loss ratios are consistently very low. Lower than the big banks. Returns on capital are consistently over 20% which is better than the big banks. Dividend yield of 1.39%.

In each year of the recession in the financial crisis they raised their earnings and dividend. You don’t have to worry about them.

Continues to grow earnings 15%-20% per annum. Trading at about 11.5-12 times trailing earnings and they continue to increase the dividend. Their loan to value on their homes is about 68%. Although housing prices have moved up quite a bit in Canada, they have a lot of leeway. There were a lot of US hedge funds that were shorting the stock last year because they didn’t understand it. Reporting tonight and he expects it to be a record quarter. Yield of 1.32%.

There is a lot of value here. His model prices $56, a 27% upside. In all likelihood it will go to $58.25 but it does have risk. At $50.25, he would seriously think about Selling and moving on. He would use this is a Trade more than a Hold in a portfolio.

Customers are people who have trouble getting loans from banks, not because they have bad credit but because they are entrepreneurs and have all their money tied up in their business, or immigrants who don’t have the greatest credit history. Management is really good. Thinks there is more upside over the next 12 months. A long-term stock that you want to own.

There tends to be a market seasonality where it is strong until March, April, May. Then there is a malaise and when the school year starts in September, we get going again. If your investment horizon is 3 months, then you could wait but for a long-term investor who is going to hold this for years, he would stay the course. If you really want to mitigate your risk, do a 3^rd today, then in another 30-60 days do another 3^rd, etc.