Chesswood Group (CHW-T)

The U.S. side of the business became weak last year. It is mostly equipment leasing as well vehicle financing. There is an ongoing strategic review. He considers it OK but there are better places to be in the finance sector.

It is a good business, well run with steady insider buying. Profits have been hurt by financing costs since there is a lot of floating rate debt.

Last year, profits were way up, but suddenly Q1 was disappointing. They took a large provision for loan losses and their costs have shot up. So, they slashed profits. Pays a 7% dividend, and shares are cheap. He has trimmed his holding. Look elsewhere.

Public company that originally was a car leasing business.
Recently pivoted into equipment leasing business.
Diversified lending company.
Growing at a strong pace.
20% return on capital with strong dividend.
Great long term investment.

They are involved in small equipment leasing, which historically has correlated with auto leasing. He is negative on the prospects for auto leasing and is concerned about the prospects for Chesswood’s funding sources. The dividend is high but the payout ratio is around 50% so he thinks the dividend is reasonably safe. However, this could come under pressure in the future.

(Top Pick Feb 24/17, Up 3.56%) A Top Pick again. The growth rate remained great and they are a potential take out candidate.

Small ticket equipment leasing to US companies. They have a top management team that can manage risks as well as the company. It has a 6.7% dividend that is sustainable and could be raised. They are a prime takeout candidate for major financial services companies. (Analysts’ target: $15.50).

A small-ticket equipment leasing business, and they also provide lending solutions. Mostly operates in the US. The small business confidence in the US is at an all-time high, and as a result, they have seen a very strong pipeline. Has a good organic growth profile. A very solid and capable management team that understands the credit cycles. Thinks this is a prime take-out candidate because it would be hugely liquid for a financial services institution. Dividend yield of 6.8% is sustainable and there is room for further dividend increases.

Just had an interesting quarter where they had great numbers both from earnings and cash flow, but their loan loss provisions came in a little bit lower than expected. It looks like management is streamlining what they have, making a few smaller acquisitions that tuck into their traditional financing business. It still trades at a pretty reasonable multiple. Also, has a nice yield which is well supported. He has this on his radar screen.

A great stock. Trading at under 10X earnings with a 7.5% dividend yield that is more than covered with earnings and cash flow. This has been really getting focused on their core business of leasing and working capital loans. They deal with small and medium-sized businesses. Very smart management. He expects to see multiple expansion to 11 or 12 times earnings, a 20% gain from here not including the dividend.

Thinks this company is destined to be privatized. Trading at about 9 or 10 times earnings, pays a really nice dividend, insiders own a big chunk, and business is pretty good. You have other leasing companies that are trading at much higher valuations. No one is really paying attention to this and it doesn’t trade a whole lot. He thinks that eventually a private equity group or management might consider taking it private. Dividend yield of 7.8%.

Good company. They have good management and it is a good business. It is at a fair price right now. Good yield of 6.6%.