Home Capital Group (HCG.TO)

The company is a lender to people with unconvential credit. People who are self-employed wihout a T4. The company's low losses are terrific. Great credit control. Billion dollar in equity in company. Trading 7X earnings. Good value and growing nicely.

Canadian Real Estate is much different than in the US. Doesn’t necessarily think it is a bad thing. Bad news (US analyst that doesn’t realize Canadian Real Estate is different) has driven it down to its 10 year cheapest.

(Market Call Minute) High profile US short sellers. This is a headwind.

This is a company that tends to lend to people where the banks won’t. They have done extremely well in the good markets that we have had in the last little while. There is a higher risk involved but at the same time, the company has grown very well. With housing a little more under scrutiny by the feds as well as the current slowdown, this would be a negative. He would avoid this one.

Management team has done a very good job. Always under promise and over deliver. EPS growth has been about 20% over the last number of years. Trades at a low multiple. They continue to increase the dividend. He is holding this for the long-term. Could see $70 over the next 12 months or so.

Such a well managed company and so well positioned that they continue to be able to source mortgages and issue credit with very low loan losses. Selling for about 2x book, value. About 20% ROE. Thinks he will jump in not too far away.

Some think the housing market is going to have a severe correction including some US investors who are shorting this one. Gives a great opportunities to get into a great name. Has a 25% return on equity. Trading at 8X forward earnings, compared to the banks at 10 or 11 times. 1.78% yield. Big banks are turning away loans that they used to take so the quality of their loan book is increasing.

Fantastic Q4 earnings. Great company. Has come off a couple of dollars in the last little while. He would be a buyer here.

(A Top Pick Feb 21/12. Up 18.92%.) Essentially owns the mortgage non-bank lending business in Canada because all competition has retrenched. Pretty much have a monopoly market share. Great dividend and earnings growth. Trading at 7X earnings.

ROE of 25%, growing at 16% and pays a modest dividend of 1.82%. Going to make $7.25 this year and is trading at under $60, around 8X earnings. Baffling to him why it is not trading in the $70s.

Has been taking a little money off the table recently because it has finally had such a good move. Still relatively cheap at 8X forward earnings. There is the risk if the housing market slows but they still have a niche on the mortgage product side. They have picked up all the business that the banks have walked away from. In a different risk category.

(Market Call Minute.) Extremely well managed and has done very well.

(A Top Short Dec 29/11. Down 21.83%.) Has been a tremendous success story in that Canadian banks tended to have relatively high lending standards in the past and this company has taken advantage of larger spreads in mortgage lending. If the macro picture in housing deteriorates as he expects, the protection this company has on its balance sheet may be in question.

Shorting Canadian housing with MCAN Mortgage (MKP-T) and Genworth MI Canada (MIC-T). Is a little bit early but he has seen the housing bubble build and believes it has now peaked and is now on the downside. If right and Canadian housing prices fall 20%-30% over the next 2 years, then these companies are not going to just be at risk of earnings but also at risk of solvency.

Management has done a great job in executing. Very cheap, trading at 10X earnings. Up 18% last quarter. Financials have started to move again. 1.8% yield.