Rona Inc

RON-T

(A Top Pick April 5/16. Up 21.5%.) (Preferred Shares.) This was bought out by Lowes, which originally was not going to call the preferreds, but they came back later with a $24 offer.

(Top Pick Oct 27/15, Up 72.19%) They were trading low because it was prior to the takeover. He stayed with it until it closed. Takeovers are a big part of his portfolio gains. He bought them because Lowes had already taken a run at them and it was turned down.

(A Top Pick Sept 18/15. Up 73.8%.) (Reset preferreds (A) March 2016.) He bought the preferreds because he wanted a little bit less risk. He thinks there is still a possibility that Lowes (LOW-N) might buy out the preferreds at $25 at some point. He loves the dividend tax credit he is getting.

(A Top Pick Aug 4/15. Up 55.28%.) This was taken out by Lowes (LOW-N). He still holds some of their preferreds.

(Preferred Shares 3.324%, Series A, callable in 5 years.) Had never liked the preferred market, because there was never any institutional ownership. All of a sudden, in this one, you have institutional ownership, and companies can’t push around the small shareholder like they used to.

Owns the preferreds which comes due in March/16. Had felt they were safer when the company was having problems. Their CEO is great and is a turnaround artist. The common shares have gone up quite a bit, and preferreds have been badly hit. The common shares are too expensive for him, but thinks there is a lot of upside still.

Preferred A. Not in the Contra portfolio as he doesn’t see it as a 100%+ gain. Likes the company and likes the guy at the head who is a good turnaround person. The recent quarterly results were excellent with same-store sales up 5.5%, income up, and the dividend shares up. Good financial statements. He is buying the preferreds because there is less risk involved. This will reset in March 2016, and he assumes he will get about 3.5%, i.e. Bank of Canada rate +2.6%. For people who buy in now, he thinks it is a potentially good rate of return. He likes it as a safer place to put money. These resets are so out of favour now that they appeal to his contrarian side.

(Reset preferreds (A) March 2016). Same-store sales went up 5.4% in the last quarter. Just increased their dividend in the common shares. He likes what management is doing. This is a safer option than common shares. Dividend yield of about 8%.

Reset preferreds March 2016. Came out at $25 and are now at $16+, so your payout ratio is pretty good. It won’t be as sweet when they reset in March. It will be Bank of Canada rate +2.65%. The company is doing a turnaround. He likes a CEO. They are looking to buy back their franchises, which will cost them some money. That will eventually help the bottom line more.

5.4% bond maturing Oct 20/16. (He is biased towards the short term because the market still feels fairly expensive. Corporate credit still offers pretty good value.) This is a little under 2 years and yielding over 3% while Canada bonds offer 5%, which is a huge yield pick up. However, it is not an investment great company. They have had some pretty good numbers as of late. He is pretty confident they will be able to refinance fairly easy come 2016.

Chart is showing a bullish sign where there are rising bottoms. Chart shows it has broken out, but has come back and is now consolidating sideways. Once it gets past its old high that is a very good sign for this company. We are in a seasonal period for it to do well.

5.4% Bond maturing Oct 20, 2016. They are continuing to chug along and make money. It is a lot compared to the Government of Canada bonds.

Preferred A. Just reported results and a lot of people didn’t like it. He is getting about 7% on this.

Had a takeover offer, which they turned down. The new head honcho has been closing some of the stores and he might be the right kind of guy to do a good turn around. Would like to see this cheaper, maybe under $10.

Doesn’t know this story extremely well. Turned down an acquisition offer. Now have a big turnaround plan in place. Likes turnaround stories but he finds retail is a difficult business because it is so competitive. There are not a lot of barriers to entry. This one doesn’t have the scale of the big US companies or their buying power. Also not sure that they have the management skill.

Thinks the business is challenged by the big box stores. Would wait on the sidelines until they sort things out.

Caller asked about possibility of a take-out. He is not an M&A guy. If the housing sector is slowing, it means a lot of people are renovating and that is a catalyst for the stock.

Retail is a tough, tough business. He’d be very careful of this sector. Looking at the chart, he would think this one is going to be dead money.

(A Top Pick March 22/12. Up 53.44%.) Sold his holdings.

Environment on the stock has changed. You have strong competition and it’s a tougher market. The takeover offer was basically shut down so he doesn’t think this is a possibility. Limited growth.

(A Top Pick Dec 14/11. Up 15.15%.) Very disappointed in the management and in particular the Board of Directors. Feels they are not acting in the best interests of the shareholders. Lowes (LOW-N) made a proposal last summer and the board would not take that to the shareholders.

Lowes could come back. Directors have not acted on the shareholders behalf. He needs more shareholder –friendly people as directors.

Very poorly run company and the short-term Québec politics has allowed poor management to hide. Will be reporting next week and there won’t be anything special. Thinks that before the next annual meeting, there will probably be a proxy fight.

If you own, you are going to have to be patient. It was disappointing somewhat that they rebuffed Lowes (LOW-N) advance. Haven’t executed well on a variety of strategies. Doesn’t see the sector having a lot of wind at its back going forward. The housing boom is moderating.

Quebec election didn't settle much. He hopes the Lowe’s takeover will not be affected. The stock has not gone down. He is disappointed that the board has not worked more to get the most from the deal for shareholders and Canadian employees.

(A Top Pick Aug 4/11. Up 4.2%.) 5.25% Series 6, Class A. Company was getting into trouble so he sold his holdings.

Hopes that Lowes (LOW-N) is successful in its acquisition and he feels they will be. Rona from a fundamental perspective has never been a favourite. Have had deteriorating fundamentals.

Hang on to it but he would not buy it if you don’t own it. If your stock goes above the offer, then take profits. There is a long history of interference in Quebec.

Declined Lowes (LOW-N) offer of a takeover. Lowes already has a decent international expansion program, principally in Australia. If you own, he would Sell.

His mind boggles at how this company can think they will grow their way out of this situation. We've had the best housing boom in Canada that we have seen in a generation and they have not grown their earnings. The bid for this company from Lowes (LOW-N) is at book value and buying here is probably not a bad idea.