Home Capital Group (HCG.TO)

Part of the problem on this is a lack of confidence, in spite of the fact that depositors are covered by the Canadian government up to $100,000.

This is under review by the security commission. A tough one with a negative pall over it until it gets cleared up. The chart shows that the stock recently had a breakdown and is not one that you would pick up. The bonds would be typically safer than the stock itself.

Has not been involved with this name. Generally speaking, when there is a name that is under pressure and their practices are called into question, rightly or wrongly he always thinks there is another shoe to fall. He would give it another quarter or so to see how the dust settles. You have to be cautious.

You need to look at the long term chart. There are lower lows and lower highs. You can’t call a bottom. You have to see a sign that it has turned. Hedge funds are playing this stock. There is high risk and no technical evidence that a bottom is in. It is for high speculators only.

There is misleading information out there promoted by short sellers. They were hit last Thursday. People are worried about a housing market correction and what the Ontario government will do to cool the housing market. They got rid of their CEO quickly. They wiped the slate clean. They got an OSC notice. There have been no credit losses so far. It has a very low valuation. Hopefully it will recover. He is not going to pull the plug.

Was Short this in the past and did reasonably well with it. The federal and provincial governments are encroaching further and further into the housing market trying to slow it down. Not sure why you would need to own this. If you need to own a mortgage lender, this is not the one.

Their language changed from pursuing “midterm targets” to “long-term objectives”. They’ve also lowered their EPS outlook from 8%-13% to 7%. The company has matured and this is a natural progression of the Canadian housing market slowing down. Still a very well-run company, it’s just that the market conditions have changed.

*Short* A very crowded short, and he generally doesn’t like to participate in crowded trades, but makes an exception in this case. There are a lot of Shorts on this, because the US hedge funds use it as a proxy for the Canadian housing market. His view is actually quite neutral on the Canadian housing market. There is a lot of runoff in their portfolio, so just to stand still they have to get at least 14% growth in terms of their number of mortgages. This is because banks have gotten smarter at catering to new immigrants to Canada. Dividend yield of 3.91%. (Analysts’ price target is $29.73.)

The outlook is dependent on the outlook for Canadian housing, which the government is trying to put the brakes on. He used to be short, but is not right now. You are better off owning a bank.

A crowded name on the Short side, but he has been Short on this. It was about a year ago when management announced a clever substantial issuer bid. They didn’t say at what price, but waited for the share price to appreciate, and did it at about $36.70. He questioned if that was efficient use of shareholders’ money. It squeezed a lot of the Shorts, including himself. People need to be cautious about this.

This is one he is looking at, but not jumping up and down at the moment. A really well run company in the alternative mortgage field. He has worries about the Canadian housing market.

The housing boom we have experienced in Canada really started around 2001. This was one these types of companies who where in their heyday. Canadian housing market has exceeded what we have seen in the US, so he feels that the run is done. We are now at a point where there is a higher likelihood that the Canadian housing market is going to flat line or pull back. There are better opportunities elsewhere, where you are not getting in at the end of a 15-year industry boom.

This has really fallen out of favour. Last year they had problems with brokers. The origination of loans was in question, as to who they were lent to, and how well they were papered. Now they are hit with a whole change in regulatory issues. This is going to affect the whole industry, not just mortgage providers like this. They have currently been putting a lot of money into systems, modernizing themselves and preparing to be a bit more leaner. An extremely well-managed company. Dividend yield of 4.09%

Comments on US Shorts? This is very heavily shorted, but she thinks by Canadians as well. They also Short the banks as well, but don’t have as much impact because of the size. Americans continue to believe the Canadian housing market is overvalued and will come to a crying end, and that they will make a lot of money.

He would be a buyer at these levels, but there is a risk. This has been in the news with Short Sellers. A lot of the Short Sellers were Short Canadian banks, and lost their shirts, and are now sniffing around for something like this company, to try and make a go of it. Doesn’t believe this will return to it historical growth or the valuation of the past, because there is a slowdown in the Canadian market as a whole. The Canadian consumer household debt levels are at the highest they have ever been. Trading at 7X PE, which is attractive. Yield of 3.7%.