Don Lato Performance Sports Group PSG-T PAST TOP PICK May 04, 2015

First of all, this needs a new balance sheet. In his work, if the stock goes below his last line, that tells him that the balance sheet is impaired. They basically need to do some write offs. He thinks the stock could go back up to $5.80 from here, which would be a pretty good gain. He would need more information before he could give a recommendation.

(Market Call Minute.) Wouldn’t buy right now. They are having difficulties. Bat sales have gone way down. There are new regulations in the US on bats that take effect in 2018. Expects sales will go up hugely in 2017-2018. They have had difficulty with sports authority.

This just took a major haircut. Has never seen a stock fall so precipitously in one day, and yet still not be concerned about bankruptcy. Had announced the currency exchange was going to hurt them in the quarter, but that has gotten better. Also, announced they were going to take a write off on a receivable to Sports Authority which had declared Chapter 11. They are far from any breach of their debt covenants, and are still generating a ton of cash. A very well-managed company.

(Market Call Minute.) This company has just blown it and it doesn’t look good. Be careful.

This company has been beset by a number of issues, including the Cdn$, decreasing demand for some of their products, and losing a bit of market share in their areas. The biggest issue they’ve had to face is their balance sheet. They levered up to do a lot of deals, and now they are paying the piper for that. However, they do have some iconic brands, and brands do hold value, and there will be a solution here.

Hasn’t owned this for a while. The debt is pretty high, and the operating cash flows have been coming down. The biggest issue is that they broke some debt covenants. They’ll probably need some new equity flow in. You will probably do better to have the money elsewhere.

(Market Call Minute.) This has been a really sad story because it is a great brand. It is hard to believe it is down at this level. There is just too much hair on this name, and he wouldn’t touch it.

He wouldn’t own this, but had been Short. They have run into some problems with debt. Lowered earnings a number of times and just have too much debt. Terrible price momentum.

There is an investigation going on. There is a lot of debt. They are not cheap. A lot of costs are in US dollars. There are a lot of negatives going for this company. It is not for the faint of heart. He is staying away from it for now.

Trading has been halted in order to avoid bankruptcy. At this point it is not an investment; it is a speculation. Fairfax has been sniffing around this. It is a model they tend to like; a fallen angel that used to earn a reasonable return on equity. Be very careful.