Hudson Bay Co.

HBC-T

Richard Baker is regarded as the best man in the ghastly department store sector. Had a meeting about a month ago and it was intriguing to hear him talk. He is very creative, and expected to create more things. Dividend yield of 0.4%. (Analysts’ price target is $13.75.)

Retail has not done well. Eaton’s used to be the largest retailer on the face of the earth. Retail then was very different than the way it is done now. You have to look at AMZN-Q. He thinks, however, HBC-T will do relatively well this season.

This is basically about the real estate. A controversial call, as the company is bleeding cash and they have high debt, so why would you own it. Their land and buildings are going to start to push the button a little, to get the difference between what it is trading at and what the real estate value is. Dividend yield of 0.4%. (Analysts' price target is $13.75.)

The chart is showing consolidation. It is finding a lid and is possibly finding a floor. He wouldn't buy this unless it breaks the $12-$13 level. If it breaks out to the upside on some volume, he would be interested. It has stopped going down, so the downtrend is over.

It is a tricky one. He has been a shareholder in the past. He recommends staying away because it is a complicated situation. He questions issuing equity that is dilutive if there was so much value in their real estate. If the retail business can’t afford to pay the rent eventually then it does not substantiate the value on those properties.

Thinks this probably should be bought here. Thinks it is a nice, patient Hold.

Has added to his holdings in the last couple of months. He understands how bad retail is because of Amazon competition. On the other hand, it is too hard for him to ignore what the potential valuation is on the real estate side. If there is $30 worth of real estate assets, they are going to find a way to surface it. The risk/reward is pretty good.

This one is hard. Missed on Q2 again, where they missed $.90. Margin compression was an issue again. There are headwinds for retail, especially for department stores. However Saks did beat their best comp in 2 years. HBC also had some pretty good comps. There are better trends in retail so far for Q3, and there is optimism for the 2^nd half. This is a risky name. It is very hard to model, as they don’t have any clear earnings path. When stocks are really hard to model, often they are the best buy.

Seasonality doesn’t really apply, because they have been going under a major restructuring. Fundamental analysts say it has real estate value at around $35 a share, and is currently trading at $12.75. There have been some activist investors trying to get the company to do something with the assets, such as capitalizing them and making them into condos. During the last couple of days, the stock has been in a trading range, and yesterday it broke above that base building pattern, for the 1^st time in 6 months, which is very, very bullish. He would guess that there are some activist investors behind this scenario that are boosting the value of the stocks.

Thinks it will be quite a while before they actually close their doors. It is one of the stocks he has been lucky on in that he got out at $17. Wonders how department stores can create a new formula for their existence. The real estate is important, and you can buy this for a recovery on sheer speculation that it goes up later. The underlying value of the real estate is quite substantial.

This is such a sectoral challenged business being a department store. A lot has been discussed about its valuable real estate, but at the end of the day it’s the stores they are operating that cannot afford the lease payments to be in those prime locations. Ultimately, at some point, the model breaks down.

It is a roll of the dice. The retail business is mature and declining. It is a play on real estate.

You have to get your head around the value of their real estate. The whole retail space is under tremendous pressure. It is just a question of when they are going to unlock those assets.

The real estate play on this has caught people’s attention. A lot of the stores could not really afford to pay. They have to wait to pay out until they are more profitable.

The retail space is a very difficult space. The core of their business is retailing, but the story is about retail and acquisition. As a real estate company they are getting near the bottom. but as a retailer there is really very little value. He does not like any retailers.

$9-$8 is acting as a base. You want to see it break above the range it has been trading in, around $12.95. This is going to run into resistance at about $12.77. The 200-day moving average is coming down as well. If it got above $13, you might want to get rid of half of it and hope the real estate holdings unlocks some higher value.

It looks to be basing. There is a possibility that the base is breaking. He would want to see it break support by 3 days or more so this would be a problem. If it does not get back to $9 soon he would be worried. It got hit last week.

(A Top Pick Jan 6/16. Down 48%.) They had a great platform to launch forward in retail. What he didn’t see was the effect that Amazon (AMZ-N) was going to have on the entire business. There is $20-$24 embedded in real estate in the company. He sold his holdings.

Has done a really good job in taking a Canadian retailer and expanding it globally. Made some very good acquisitions and have done that quite well. They also have a pretty serious real estate portfolio which they could spin out to create some value. We are talking about the retail landscape and waiting for the company to create value from real estate, which may or may not happen. A cheap value stock, but their fundamental performance has not been that solid recently.

A tough one. It is a company that appears to have a lot of value, very valuable real estate assets, but obviously operating in a very tough space. Department store retailing is getting a lot of pressure from things like Amazon (AMZN-Q). The company has a lot of leverage on its balance sheet, and it is really not clear what they can do to surface that value. Real estate is only as good as the tenant that is renting it.

This is a retailer, and they’ve been buying more retail, but it is really a real estate play. The price could probably double if they flow out a REIT and realize value on the real estate side. They are losing money on the retail side now though.

He has difficulty in what is happening in the retail market. He does not see a heck of lot of volume in the stores. There is a secular movement toward on-line shopping and he does not see how they can compete. Plowing through inventory is a margin squeeze.

There is some enthusiasm about spinning out a real estate arm. He does not like the idea of such a REIT in which there are questions about the viability of the tenant. He does not think HBC-T can make the transition to an ecommerce player.

There is a time when you have to pull the pin before you lose more money. But every company has a moment where they face plant. He thinks the real estate value alone is worth a lot more than where it is now. He has not sold his. He would hold it and grit.

(Market Call Minute.) Going through a bit of choppiness. Real estate is probably worth a lot, relative to the share price. Until you actually see that realized, weakness in their retail operations could put pressure on the stock.

The story now is that you are probably getting better than $20 in real estate assets, and retail for free. If they lever up to buy Macy’s, they have to bring in joint venture partners, which would probably be real estate partners, he thinks the whole entity in the end would trade at an even bigger discount, because the debt suddenly embedded in this thing would be absolutely huge. The risk parameters would go higher. The stock has rallied a little, and he has traded out of it, although he still owns a small part.

Retailing has changed. The proportion of people buying online is skyrocketing every year. This company has issues with foot traffic into their stores. Oddly enough, the Macy’s deal looks quite interesting. It is an opportunity for this company to acquire a retailer with partners on the real estate side, and it can be structured in a way that they don’t actually pay much for retail operations. He doesn’t know enough about Macy’s to say that it is a retailer that they need to own. He would look elsewhere on the retail side.

He is concerned about the retail sector and the secular trends of increased penetration from e-commerce. The company has somewhat recognized that and are trying to get ahead of the curve, so have spent a lot of money in getting best in class warehousing and distribution logistics. The issue remains on how profitable the retail entity is going to be 3-5 years from now, as e-commerce penetration continues to increase. There is definitely latent real estate value, but how much is a real estate actually worth if the tenant is no longer a going concern or is less of a going concern.

Just bought some for speculative accounts. 4^th quarter earnings were not great. You have a business, and then you have another game with real estate. Right now, he would reckon that the shares are trading at about a 40%-45% discount to the real estate value. It is getting to the point were something has to happen. He wouldn’t be surprised if they did some IPOs. This isn’t a long-term Hold, and if you can get a trade out of it, great.

The stock is trading at about a 40% discount to its value. It has never traded that low. The problem is that the earnings forecasts have collapsed and are falling into negative ground. There is nothing to assign a value to when doing an analysis. The quality has slipped on the balance sheet. We should not lose site of the fact that they have some really interesting real estate holdings. He thinks IFRS accounting would apply a much higher value to their holdings. There could be a lot there from a net worth point of view.