Opinions
Benj Gallander
Rifco Inc.
RFC-X
DON'T BUY
Feb 20, 2013
Stock price when the opinion was issued
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Think of a bull market as like a baseball game. When you get into the last 3 innings of the game, it doesn’t matter what financials do in earnings, people kind of get cautious. With his recent discussions with management and his own analysis, it suggests all is well. Everything is going well so he continues to own the stock. Has no problems recommending it as a Buy. March year end so people will soon be looking at as valuation in terms of the following year. Right now it is on 20X this year’s earnings and 12X the following year’s earnings. Just be patient and it should get going again.
(A Top Pick June 24/13. Up 32.95%.) Screens really well. Just produced their full year’s results last week, and are guiding to another 35% growth in earnings. Very high ROE. Had a correction. Found its bottom some time back in May. Projecting earnings of 35% growth. These types of companies tend to get acquired by a bank.
Later in an economic cycle and you get your first downturn, consumer finance companies are going to get a little beaten up. If you hold these for 10-15 years, it's fine as they always bounce back higher than before. If you are someone who is occasionally adding or subtracting to your portfolio, then these are the kinds of companies you want to lighten up on. The only offsetting factor is that one of its main competitors got bought out. Given where interest rates are, a lot of big financial institutions want to be in this space. Later in the cycle, he might be turning his holdings but currently he is holding on as he has a feeling that this one is going to get taken out by someone.
A vehicle lender based in red Deer Alberta. Although a national brand, they tend to be more skewed towards the prairies. They are in the C lending category, which is not quite as risky as the D. Nonetheless, a lot of their vehicle lenders are in Alberta, Saskatchewan and Manitoba. The fear of the market is that if, for some reason, people start losing their jobs and can’t meet their car payments, it would be vulnerable. There is some truth to this, so he would rate this as a Hold, not a Buy. Once oil steadies and bottoms at $55-$60, this is an interesting, non-resource stock that is an attractive play on Western Canada.
(A Top Pick June 24/14. Down 70.99%. My records do not show Jason being on BNN on that day, so I am using the figures that BNN is showing.) He didn’t see the drop in oil coming, and this one is really focused in Western Canada with a really large exposure to Alberta. Trimmed a little at around $4, but is going to ride the rest of it out. This is now a Hold.
(A Top Pick June 19/14. Down 48.71%.) Everything was great until the oil/gas problems came along. People were quite concerned that they were sitting on a bit of a disaster, but when things started to go last autumn, you just couldn’t get out. Came out with their 3rd quarter results, which weren’t actually too bad. He had been contemplating having this as a Top pick. Trading at about 8X earnings and growing at 25% a year. Good management team.
Most recent quarter was a great one. ROE was 28%. With all the stuff that is happening in the marketplace right now, there are a lot of concerns about Alberta specifically, and you also have a lot of concerns about financials. Thinks they put in a great quarter. To be a buyer of the stock, he has to see oil find its bottom. Once they got that stability and he sees another quarter or 2, this will be fine. Probably in Q1 or Q2 of 2016 he’ll begin to add to his position again. A very well-managed company.
Alternative financing field for cars. Stocks that are really hot and have moved a long way are really out of his purvey. Doesn’t like their balance sheet. There is so much money in accounts receivable and on the liability side and securitization. Doesn’t see any cash.