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Screening Criteria? He likes stocks that have been in business more than 10 years, that should be trading at $10 or less, with little or no debt on the balance sheet. Also, the stock has to be down 33% in the past year. He likes trading towards the low end of a 10-year range. Wants at least a 100% upside, often 200%, 300%, 400%, based on what the stock price has been in the past. Likes to know that management can do what they say they are going to do. Insider buying is something else he likes. If the sector is out of play, that is worth one of his points.
Prem Watsa owns about 40.1% of the common shares. Do you buy this for capital appreciation, the dividend, or perhaps for the breakup value later on? That is definitely a good signal. It could be a good contrarian pick now. They have no debt, and the dividend is over 6%. The high dividend is a danger signal. This is risky.
Getting a $5 billion injection from Walgreen which will help with their long-term debt. Has had his brains blown out of the water on this stock. Bought it as an arbitrage play because of Walgreen. Has bought more recently. This has been one of his big losers. He is happy to hold it as he thinks it has a lot of upside. Same-store sales going down in a company is not great.
The number of shares is absolutely insane. The share count has grown dramatically. They’ve been in survival mode for quite a while, but thinks they will survive. It wouldn’t surprise him if they did a share consolidation. Share consolidations are virtually always bad for stocks. A speculative play, but it could be good. Doesn’t think you will lose all your money. He doesn’t see putting dollars on it at this time.
(A Top Pick Dec 22/16. Up 15%.) A huge Dutch insurer and operates in many countries. Had huge problems during the recession and had to be bailed out by the Dutch government. They seem to be getting their house in order. They could be on the comeback trail. They’ve been doing well over the past year. It wouldn’t surprise him if this ultimately tripled.
(A Top Pick Dec 22/16. Up 44%.) He likes what John Chen is doing. He basically hits targets. When looking to turn around a company this big, it takes a huge amount of time. In this case, it was more difficult, because they had to get out of one space and more into another. One of the beauties of this company is that as they turn, the analysts are on it regularly, so more people will jump into it.
(A Top Pick Dec 22/16. Down 50%.) This deals with digitalization, things like e-books. On the conference calls, they are always super optimistic. In the last 2 conference calls, they weren’t. Sales have flatlined and they’ve been losing money. Expects that over the next 5 weeks there will be tax loss selling on this. He is happy to hold it, but it probably won’t pay off for quite a while.
Has been very good to him. He bought it at around $.25 several years ago, when they were potentially on the verge of bankruptcy. Brought in a new CEO who had been at another brewery that got taken over. Sold out a few months ago at $3.99. It is still over $3, so it has zero interest for him.
He would suggest looking at the goodwill on the balance sheet. If they have to write it down a long way, that would really hurt the BV. They have a tremendous amount of debt, so they are not out of the woods. Has huge upside potential. Oil and gas has come back in favour to some degree. Worth a look, but expects there will be more tax loss selling and it could go down a lot further.
Besides sugar, this is now going into maple syrup. Thinks that is a smart move. The company has been a great spin off in terms of dividends. Has never bought this, but wishes he had. Maple sugar is not out of favour the way sugar is. He is not buying, because there is not enough upturn in the stock. They pay a really good dividend.
Oil and gas? He doesn’t think this is very contrarian now. A lot of companies haven’t come back, and some have come back a fair distance. You can look at a number of companies that have been so-called survivors. Because they’ve survived this long, that increases the potential of them surviving into the future. There are still some that will go under, but thinks they have seen the worst of it. Definitely a sector worth looking at.
Market. It is fascinating what has gone on. If someone had said at the beginning of the year that the market was going to do what it has done, most people would have said that it was unrealistic. The American market in particular, but now the Canadian market too has caught fire. It’s fascinating to watch, but it makes it much harder for him as a contrarian, to find value stocks he can buy during this tax loss season. Hopefully he can find some that he can cherry pick towards the end of the year.