Latest Expert Opinions

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DON'T BUY
DON'T BUY
August 2, 2016

Has a lot of respect for the family behind this company. This business is predicated upon higher commodity prices than what we see today. The goal for a commodity business is for them to get stronger through a downturn, not having to sell one of their best assets. Doesn’t think they proactively manage their balance sheet, but made some decisions around facilities and infrastructure, that if oil had stayed at $100, it would have looked really smart. With oil at $30, it almost cost them their legacy.

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Has a lot of respect for the family behind this company. This business is predicated upon higher commodity prices than what we see today. The goal for a commodity business is for them to get stronger through a downturn, not having to sell one of their best assets. Doesn’t think they proactively manage their balance sheet, but made some decisions around facilities and infrastructure, that if oil had stayed at $100, it would have looked really smart. With oil at $30, it almost cost them their legacy.

COMMENT
COMMENT
August 2, 2016

Usually, in resources, if you have a lot of land or a lot of cash, time is your friend. This is the only one in Canada that had a lot of land and a lot of cash, and time was their enemy. What they had promised to investors was taking their conventional oil sands business, using the excess cash it had generated, and investing in a bunch of unconventional opportunities. What they ran out of was time and money.

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Usually, in resources, if you have a lot of land or a lot of cash, time is your friend. This is the only one in Canada that had a lot of land and a lot of cash, and time was their enemy. What they had promised to investors was taking their conventional oil sands business, using the excess cash it had generated, and investing in a bunch of unconventional opportunities. What they ran out of was time and money.

DON'T BUY
DON'T BUY
August 2, 2016

Always struggles to understand why investors pay such a high premium for certainty. Businesses where organic growth is abysmal at 1% or 2%, investors willing to pay 18 or 20 times, it is really just better than a bond type of investment.

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Diageo PLC (DEO-N)
August 2, 2016

Always struggles to understand why investors pay such a high premium for certainty. Businesses where organic growth is abysmal at 1% or 2%, investors willing to pay 18 or 20 times, it is really just better than a bond type of investment.

COMMENT
COMMENT
August 2, 2016

This is an example of a “me too” strategy within healthcare. Canada, in many ways, becomes the sort of the winner’s curse market, where if you can take a business public and you get the highest multiple in Canada, it comes to Canada and doesn’t always make sense. You have to look at how they drive growth. For them, a big source of their growth was cutting, spending, both headcount and R&D, and then cheap debt. They were able to use a lot of cheap debt to fuel acquisition growth, which fed earnings growth, which got the market excited. If you are not fundamentally creating value in businesses you are acquiring, it is not a sustainable strategy.

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This is an example of a “me too” strategy within healthcare. Canada, in many ways, becomes the sort of the winner’s curse market, where if you can take a business public and you get the highest multiple in Canada, it comes to Canada and doesn’t always make sense. You have to look at how they drive growth. For them, a big source of their growth was cutting, spending, both headcount and R&D, and then cheap debt. They were able to use a lot of cheap debt to fuel acquisition growth, which fed earnings growth, which got the market excited. If you are not fundamentally creating value in businesses you are acquiring, it is not a sustainable strategy.

COMMENT
COMMENT
August 2, 2016

Had no idea how dominant their position was, not just in retail eyewear in terms of exclusive retail rights for a lot of brands, but also owning the optical retail locations as well. This is as close to a monopoly as you can be. A phenomenal business and the returns are great. When you have businesses that have to make transitions from the individual to a corporation, you can run into a lot of problems. Great business, but when the management team changed he stopped following it.

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Luxottica (LUXTY-5)
August 2, 2016

Had no idea how dominant their position was, not just in retail eyewear in terms of exclusive retail rights for a lot of brands, but also owning the optical retail locations as well. This is as close to a monopoly as you can be. A phenomenal business and the returns are great. When you have businesses that have to make transitions from the individual to a corporation, you can run into a lot of problems. Great business, but when the management team changed he stopped following it.

COMMENT
COMMENT
August 2, 2016

Being acquired by Tesla (TSLA-Q), so by buying this, you are really buying Tesla. He would not bet against Elon Musk.

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SolarCity Corp (SCTY-Q)
August 2, 2016

Being acquired by Tesla (TSLA-Q), so by buying this, you are really buying Tesla. He would not bet against Elon Musk.

COMMENT
COMMENT
August 2, 2016

The company is really at an interesting time. They had a lot of spinoffs to finance their pipelines. It was really just a cost of capital arbitrage. They brought all those in, slashed the distribution to what they believe is a sustainable level, cut their backlog and stated that they were not going to borrow to fund projects. That worked when we could get money really cheap, but can’t seem to get as much money now or as cheap. They are actually migrating back to a growth stock.

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The company is really at an interesting time. They had a lot of spinoffs to finance their pipelines. It was really just a cost of capital arbitrage. They brought all those in, slashed the distribution to what they believe is a sustainable level, cut their backlog and stated that they were not going to borrow to fund projects. That worked when we could get money really cheap, but can’t seem to get as much money now or as cheap. They are actually migrating back to a growth stock.