Fabrice Taylor Jean Coutu Group (PJC) (A) PJC.A-T COMMENT Dec 04, 2015

This has been under pressure because of declining generic drug prices. Pays a decent dividend and, on a valuation basis, this is a good entry point. Likes their franchise model, which means their CapX is much lower than if they were corporately owned. About 95% of the stores are franchised, so there is a reoccurring revenue stream with not a lot of capital tied up.

There was some news recently on prescriptions in Quebec, similar to Shoppers a couple of years ago. He likes the pharmacy business, however.

In the downturn this stock most definitely took out its past lows. Had been making a higher lows and higher highs and the last low of around $24 definitely broke. It may be starting to put in a base, but he would like to see it bounce around a bit and find support at around $19 before buying.

The seasonality on this tends to positive in the summer. The stock tends to peak out around the middle of September, so we are getting close to the end of a period of seasonal strength. Technically the trend is down, but seems to be trying to form a base. Trading below its 20 day moving average which is not so good. Short-term momentum indicators are slightly positive. The time to take profits is probably from the middle to the end of September.

He does not know the seasonality on this one. The chart is not so good. The stock is in a downward trend and may be trying to find support above $18. It is underperforming the market, below the 20 day moving average, and the momentum indicators are on the downside. There is insufficient reason to buy at these levels. Watch it to see if it bottoms.

In retail, he would be looking at off-price retail or convenience. Alimentation Couch-Tard (ATD.B-T) is one. Jean Coutu is down about 10%-11% from its highs and is underperforming the group. Likes the consumer, but wants to own one that has a bit of a tailwind.

Because of the Québec base and lack of growth, he wouldn’t go to this.

Operates pharmacies primarily in Québec. He likes the space and it does meet his criteria. Their cash ROE is just shy of 30%, and their cash ROE/PE metric is about 2.67. Based on those metrics, this would be a good one to own.

He does not hold because of valuation and that the sector is one that he does not need to be in. If you are sitting on gains, there is nothing wrong with taking them. It may go up because of share buybacks, however.