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Investment Q&A

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Q: AVO revisited: The central issue seems to be the CFO departure and whether it is health related. Why doesn't he simply issue a statement confirming or denying this? I noticed the CEO did not mention health in his interview. He actually tap danced around the issue saying "don't read too much into it". He could put an to this as well by issuing a statement that is more direct and less ambiguous.

In all likelihood they have made millions with AVO in part because so many of us have bought the shares. I would think given the circunmstances both of them owe their fellow shareholders an explanation. Otherwise this dark cloud is not going to disappear for quite a while. And innocent shareholders will suffer!!!



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Read Answer Asked by Donald on May 09, 2014
Q: Avigilion's growth rate has not slowed, the margins are even better and there has been a huge sell-off. I had a 5% weight in my portfolio which would be lower now at today's prices.
Is this the right time to buy some more and increase the portfolio weight with a lower average price? If you do not agree then would you suggest buy for a short term trade? With such a sharp drop, there has to be a bounce back about 10%? Or should i look to bail out when there is a bounce back? The average time frame that i try to invest for is 12 months.
Read Answer Asked by Rajiv on May 09, 2014
Q: Hi Peter & 5i: This just a comment on the recent Avigilon (AVO) events. I owned it. Now I don’t. I don’t view the quarterly report as a definitive answer to everyone’s worries upon the news of the CFO’s sudden departure, at least not all by itself. Management reported a great quarter but quarterly reports are not usually submitted to an external audit process the way that annual financial reports are. It is at least extremely odd that a CFO would have to exit the scene on the eve of the release of a financial report, when the production and accuracy of that report should presumably have been his responsibility. I have no insight into the facts of what has been going on at Avigilon but at this stage I identify that lack of knowledge as a significant barrier to continued investment. It may be tempting to view this as a situation where a healthy and growing company needed to part ways with a CFO, who for one reason or another was not going to be a long term good fit for the company. But it seems to me to be at least equally likely that a CFO’s departure on the eve of a quarterly report release may indicate that the CFO was not willing to stand behind the numbers and representations that management had chosen to go with in the report. If that is the case, then it could call into question the very report that optimistic investors are using as their basis for remaining invested, or possibly for re-investing or increasing investment after the decline from recent highs. It also seems to me that the downward trend preceding this report was fueled at least in part by earnings in the prior financial report missing the Street’s estimates. I would also look back to the last equity financing, which was upsized midstream, and the need for which has yet to be made clear. Not that it is anything like too late for redemption but 5i’s own answer from a March 18 Q&A was as follows:

“With this deal being upsized now to $100 mm we are somewhat surprised. The company, if nothing is bought, will have way too much cash. We will need to watch the company closely. We will be none too impressed if Avigilon does not utilize its cash hoard within a two or three month period. For now, we will give management the benefit of the doubt, based on past performance and their comments.”

So the most recent events may not turn out to have been the first crack in the egg. Whether or not my speculative concerns turn out to be valid, these kinds of issues can prompt short sellers’ attacks, which can play havoc with an investment thesis and chase people out of a stock at lower levels. So all in all, the risks on AVO seem higher to me, and the very positive report that the CFO did not stick around to present is not the perfect answer. Caveat emptor – at least.
Read Answer Asked by Lance on May 09, 2014
Q: avo
do you know management, and trust them ?
do you believe health issues as a cause for the departure of the CFO?
do think there may have been disagreements causing the departure?
has the recent equity together with the departure raise a red flag?
I am interested in buying more but want to know if you feel all is honest and management has integrity. The market seemed to believed in management and positively assess the results for an hour or so when the stock went up 10%ish but then it lost 6.7% at the close.
your advise would be appreciated
thanks as always .
Yossi
Read Answer Asked by JOSEPH on May 09, 2014
Q: Avigilon AVO
I recall the same comments being said about another fantastic growth stock, Poseidon Concepts.
-market leading technology
-high multiple growth stock
-huge earnings growth

The timing is way too coincidental having the CFO resign right before releasing earnings. Unless he`s dead, health reasons is a bunch of BS.

Peter, is your team able to dig deeper and recognize any red flags for accounting irregularities? I noticed inventories have increased and they also recently did a share issue. Could the share issue have been one final grasp for cash?

The market is rarely wrong, over the longer term. CFO departures alone should not drop a stock 20% after the announcement.
Read Answer Asked by Terry on May 07, 2014
Q: Hi,
As per below from Globe Investor, have you heard anything on why other executives have been leaving the company in the past?

Analysts - and certainly investors - are sounding the alarm over Avigilon Corp. after it announced late Tuesday the third senior executive departure in the last six months. Shares are down 17 per cent in early TSX trading today.

The security solutions provider said chief financial officer Bradley Bardua left the company because of health concerns and that Wan Jung, a director, has been named interim CFO.

"We think the timing of Mr. Bardua's departure (one day before the fiscal first quarter 2014 earnings report, could not hold on for another day) is too coincidental for comfort," said Raymond James analyst Steven Li. "We believe Bardua was well thought of by the Street – and so this will be seen as a loss."

His "outperform" rating and $35 (Canadian) price target were both placed under review.

Chris Ross, executive vice-presdent of global operations, left in March of this year and Keith Marett, an executive in charge of marketing and product strategy, resigned in November 2013.

The company is expected to release its latest earnings after market close today. The consensus is for earnings per share of 14 cents, on revenues of $56.3-million.

Thanks.
Read Answer Asked by Christopher on May 07, 2014
Q: AVO

LOL... Guess the Market didn't like that very much.

Comment Only... AVO is a quality company and if the CFO was sick, I am sure he could have waited a day or two to make an announcement considering the timing. Obviously, there has been some catalyst for him being dismissed.

I am going to assume it may take 2 or 3 quarters but we will see AVO once again thriving... Am I wrong? Or should I kiss my $2 Grand goodbye? Highly unlikely.
Read Answer Asked by Gord on May 07, 2014
Q: Hi Peter and Team, regarding Avigilion, AVO, you just wrote 'so its experience with these sort of issues is limited' - come on, you really don't believe that d you! Any bafoon would know that letting your CFO go (which is how we all read it - fired) the day before releasing results is going to hit the stock price hard! They really should have halted the stock before announcing the CFO is gone considering the results come out today! Even if nothing is wrong, they should have halted the stock knowing the stock would get hit hard. This is not a limited experience issue in my opinion, it's either mis-management, manipulation for the stock to fall or a message of bad things to come, which should have been relayed much sooner then now! I have lost trust in how they have done this. Just my two cents worth. Thanks.
Read Answer Asked by Hussein on May 07, 2014
Q: Hi guys,

For Avigilon (AVO), if the CFO was fired because of accounting "irregularities" that affected or misrepresented earnings, wouldn't the company want to halt the stock and provide the accurate information rather than say its for health reasons and then 24 hours later risk losing accountability and have the market potentially discover the real reason for the firing in the financial report?
Read Answer Asked by john on May 07, 2014
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