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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: The US commercial property crisis has become hot topic again and the share price of New York Community Bancorp decline a lot . Please comment on the impact on these banks. Thanks a lot.
Read Answer Asked by Lai Kuen on February 02, 2024
Q: Hi 5i
Regarding your answer to my earlier question about BMO....
"Overall, we would stay away from financial institutions with a weak capital base and questionable loan book quality. In a loss scenario, as we saw last year in the regional banking crisis, equity can at times be eroded quickly."
Is BMO in a situation where this is a similiar issue for them?
thx
Read Answer Asked by jim on February 01, 2024
Q: Hi 5i, I currently hold JPM in a registered account and I'm looking for more growth in the next 5 to 10 years. Which of the three listed has the best growth profile and is shareholder friendly. I want to stay in the financial sector and if you have a better idea, an idea listed as a CDR, please suggest. Thx.
Read Answer Asked by Christopher on February 01, 2024
Q: Hi 5i
I have done well with all 3 of these but I am concerned that lower interest rates will cause them to pull back. Would you agree? According to G&M site, there isn't a lot more upside with avg. target prices about $31 MFC, $41 POW, AND $74 SLF. All 3 are close to 70 RSI which I use as a warning sign. I would appreciate your thoughts and if I were to sell one, which would you suggest? Now that MFC has finally gone above $28, do you think $30 will be an exit price for a lot of investors who are tired of the $24-$28 trading range?
Thanks, Greg
Read Answer Asked by Greg on February 01, 2024
Q: I can not find ether capital in your search?
Read Answer Asked by victor on January 31, 2024
Q: Which of the BN subsidiaries do you think offers the best overall return profile over the next 5-10 years and why.

Many Thanks
Scott
Read Answer Asked by Scott on January 30, 2024
Q: In some answers, you have referred to some lending companies being exposed to a "rate risk". I am not clear what that is / when it will impact a lending company. More specific to GSY....is it exposed to a rate risk? How will anticipated falling rates affect it? I know that new highs ( or at lest here a recent one) do not concern you but given its run up in recent months, are its valuation metrics still looking favourable?
Thanks for your excellent service.
Read Answer Asked by Leonard on January 29, 2024
Q: Hi, Referencing the recent questions on GSY, here is some color from CIBC on the rationale for their Downgrade to Neutral. Please publish, at your discretion, with or without your comments.

"Downgrading Go Easy To Neutral"

"After reviewing draft regulations for the new interest rate cap, it has come to
our attention that a consultation process was recently completed examining a
further reduction to the rate cap. The timing of the consultation was much
earlier than expected, and we are left to wonder if it was scheduled
intentionally to conclude in advance of the 2024 Budget. We have no basis to
speculate on the outcome and no proprietary insight on the decision-making
process of the Finance Minister’s office. However, we fear that a political lens
might be more appropriate in assessing the probability of further action on the
interest rate cap than an academic one. There has clearly been some forward
progress on this file and it simply doesn’t feel prudent to maintain an
Outperformer rating on goeasy in advance of the Budget. We are
downgrading GSY to Neutral and maintain our $160 price target.

Our concern, however, is that decisions of this nature can sometimes be influenced by the desire to achieve political objectives rather than engage in a balanced assessment of a complicated issue. The considerations described above did not prevent the government from taking action on the initial reduction to the interest rate cap, and our concern is that it may not stop it from taking action to reduce the rate cap further.

We believe that the first sentence of the draft regulations may be somewhat revealing regarding the federal government’s sentiment towards instalment lenders:
“Predatory lenders take advantage of some of the most vulnerable people in our communities, including low-income Canadians, newcomers to Canada, and those with limited credit history—often by extending very high interest rate loans.” Describing instalment lenders as “predatory” sounds almost adversarial or outright hostile, in our view.

Bottom Line

In our view, the range of potential outcomes appears to be skewed asymmetrically negative. On the one hand, the federal government could elect to take no action and this would become a non-event to shares of goeasy. At the time of writing, we believe that this outcome is already priced into the stock. GSY shares have run up nearly 50% since late October (i.e., the same month that consultations were launched) and the P/E multiple has normalized back towards long-term averages (see the line chart in Exhibit 3). This suggests to us that there is little evidence that public market shareholders are bracing for an adverse outcome.
On the other hand, the federal government could take a heavy-handed approach and reduce the rate cap further. In this scenario, the magnitude of almost any reduction would likely be meaningful to the earnings power of GSY. "
Read Answer Asked by rajeev on January 29, 2024
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