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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: A recent negative article in Seeking Alpha by Timberwolf Equity Research raised a few points that I hope you can comment on. The company was not calling for a short on the stock so the article does not appear to be self serving, although that in itself is not much proof. So while the article appears to be based "on facts", it does not agree with your recent review of the company.

The article as best as I can understand it raises 4 points.

1. That Starbucks accounts for 35% of the company's sales (23% of revenue). They acknowledge the company does not state this but that they have figured it out.

2. Inside ownership. and therefore an alignment of management interests with that of other shareholders, is a mirage because the company has provided these particular shareholders with low interest loans that require the value of the stock as collateral and for the dividends to cover the principle repayment costs. Therefore, the company's management has an incentive to raise the dividend whether warranted or not.

3. Cash flow is miss-stated because the company excludes working capital changes as it only includes replacement capital expenditures and leaves out expansion capital expenditures (I won't pretend that I understand this). The upshot is that the company's cash flow is closer to $28 million rather than the $81 million stated by the company.

4. Share count is ever increasing because the company finances its takeovers with low interest convertible debentures which almost assuredly means that the debenture holders convert their holdings into stock. The authors estimate that this resulted in a 22% dilution in 2015.

Appreciate your insight into these matters.

Paul F.
Read Answer Asked by Paul on July 28, 2016
Q: I would like to cut my losses on BAD and buy something with more potential. My portfolio is balanced and this would be in my RSP account. What would you suggest?
So reassuring to be able to consult with you!
Ellen
Read Answer Asked by Ellen on July 27, 2016
Q: Hi, could you please comment on DH earnings. At the first glance, Revenue, EBITDA and FCF, all seem to have meet or beat estimates. Laser Pro renewals are still weak (as expected) but organic growth in other areas appear to be decent. Debt reduction seems to be a priority. How do you read their commentary on outlook ? DH stock has gone thro' quite a roller coaster, after past two quarterly reports. Any thoughts on reducing or adding to present position. Thanks
Read Answer Asked by rajeev on July 27, 2016
Q: Hi Peter & Ryan, not many companies report earnings on Fridays after the markets are closed for the weekend. Fiera Capital has just indicated their earnings release will be on Friday August 5th after the close with their conference call being held 3 days later on Monday August the 8th. I don't recall many companies reporting after the close on Friday but the few I remember doing so did not release good results. Am I being paranoid or do we holders of Fiera Capital have reason to be nervous? Your thoughts... Thanks. Mario.
Read Answer Asked by Mario on July 26, 2016
Q: Hello Peter and Team:
When I look at the two year chart of DHX's share price in the absence of any other info I just see "lower highs and lower lows". I know in the recent past you have mentioned the positives of management, growing dividend and library and even possibility of takeover some day and the negative of debt. I'm wondering if you believe that there will have to be a specific catalyst to turn this name and if so, what you think it might be? Is there any chance that getting to $1B market cap might be it(they must have been close before when the share price was nearing $10.00)?
Thanks,


















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Read Answer Asked by Stephen R. on July 26, 2016
Q: I am reviewing my HCG holding and need help with a few metrics. The LTD, while it has come down is still at $41/share ($2.9b/70m). Is this a level of debt that one should be concerned about? Also expected earnings growth of 7%($4.11-4.70) does not seem great over the next 2 years. Finally despite the recent share buy-back, total shares appear to have grown 69 to 70 million. I have taken these numbers from RBC Direct.
Your comments as usual are appreciated.
Mike
Read Answer Asked by michael on July 25, 2016
Q: I bought HCG during it's "glory" days, in Oct. 2014, at $51.10. Currently, I've been patiently waiting for the good days to return for the stock price. I have a 40% capital loss. It seems you like the company and the stock. Since it's in my TFSA, I can either wait for a recovery, or take a loss and deploy what's left of my capital elsewhere. What do you see for the stock in the next 1-2 years?
Read Answer Asked by Helen on July 25, 2016
Q: I'm considering a 2.5% investment of my portfolio in TIO Network[TNC]. Is this too much or too little?Since you began covering it last Oct., it has run up from $1.40 to a close of $2.39 yesterday. Is that too expensive for a buy or has it grown enough to offset that price increase?What are its short & long term prospects for growth? As always, your imput is much appreciated.
Read Answer Asked by Dave on July 25, 2016
Q: My question concerns fuel pricing and specifically, profit margins. Prior to ATD.B's last quarter results, concerns were raised about a potential decline in profit margins from gas sales. However, I thought retail gas price margins were quite stable and that it was the underlying price of oil that caused gas prices to gyrate. In fact, I thought retailers were helped by fluctuating oil prices because they are quick to raise prices when oil goes up (thus selling lower priced inventories gas at a higher price) but slow to lower them when oil drops. Is this thesis correct? If I am at least somewhat correct, it would therefore seem that overall sales is not that important a metric for these companies.

How much do gasoline profits contribute to these companies over all profits? Or are in store sales more important?

Appreciate your insight.

Paul F.
Read Answer Asked by Paul on July 25, 2016
Q: Hi, CCL Industries stock price has stalled lately after touching a high of $249, few months ago. Recent acquisitions, including Checkpoint systems should be positive to its business and profitability should only go up. Even when markets are hitting new highs every day, stock price seems unable to move out of its narrow range although most analysts have price targets between $275-$285. CCL.b is almost 8.5% of portfolio and I am considering scaling it down. What is holding its price performance, in your view? Based on the recent Winpak results and other information/indicators, is it prudent to wait until quarterly results are released or act now to avoid risk of a surprise on the downside? Thanks
Read Answer Asked by rajeev on July 25, 2016
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