Investment Q&A

Q: I am up about 40% on GSY (thanks 5i). Weighting overall in the portfolio is still okay. At what point would you suggest trimming. Or in other words, where do you think it might be a year from now? Thanks.

Q: Thoughts on the quarter. What is the new forward PE and how does that compare to the historical PE range?
Also, they increased the dividend for 10th consecutive year. What is the dividend growth rate over that time frame?
Thanks Rob

Q: I have to say, having been investing in the market since 1980 I don’t recall any company increasing its dividend by 22% in a year
What are your thoughts on the Q and year

Annual Dividend per Share Increased to $4.68, up 22% from $3.84

Q: What should we expect/look for in earnings this afternoon? Thanks

Q: I guess this is really a basic tax loss question. I wish to sell BNS in my non registered account which is mainly full of large dividend paying companies. Does it make sense to sell GSY ( at a profit ) , sell BNS ( at a loss ) and then rebuy GSY , thus taking advantage of tax loss provisions. It will also give me the advantage of a higher cost price for GSY for the inevitable sale. Should I do this procedure with the stock that has the most comparable gain to my BNS loss ?
Thanks. Derek.

Q: Hello 5i Team,
I see Propel raised its dividend by 14% today. I'm thinking about trimming 1/2 of my GoEasy and adding to my Propel holding. Thesis: management owns 56% of Propel and they are playing in a bigger sandbox in the US. What are your thoughts?

Thanks,
Brent

Q: Goeasy is getting toward an 8% position for me - does it make sense to sell some to buy EQB? Thanks!

Q: Hi Peter,
Can you rank (and why) these three stocks for a +5yr hold in terms of risk/reward?


Thanks

Q: CIBC analysts have suggested one of the reasons they downgraded this name today was potential concern of more and lower restrictions on the maximum interest that company’s like Goeasy can charge.From 35% to 30% for example.How likely do you think this potential/fear could be?

Q: Hello Peter and 5i team,
My TFSA contains the aforementioned stocks in roughly even percentages except for nominal investments in Park Lawn and DRX. I would like to make my annual contribution to one or some of these companies and would like to know what your order of preference would be for buys/adds at this time. Please also include Celestica in your considerations.
Also, are there any companies in this list that you would consider undervalued at this time?
Thank you.

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.

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. "

Q: Down this morning because of a rating down grade. Do you consider this a buying opportuity? Thank yiu

Q: Any reason you are aware of for the drop in gsy?

Thks
Marcel

Q: Will the coming Federal rate cap be a big impact on Go Easy?

Q: GSY has been dropping the last 2 days. Is there any negative report that has been released on it? Thanks

Q: I want to add one of these to my TFSA. With potential total growth in mind, could you please list these in order in which you think might do best. Thanks.

Q: Recently you recommended the above companies as top 5 small caps. Could you rank from 1 to 5 re: upside potential?
I currently own EQB and GSY.
Many thanks

Q: Expanding on my recent question about my desire to reduce exposure in the Financial Services sector, today's article in the Globe & Mail is of concern:

"Non-prime lenders warn thousands of borrowers they could be cut off because of new maximum interest rates"

Should this cause me to rethink my strategy to reduce TD to raise the cash? As you pointed out in your answer, GSY is significantly riskier than the our other holdings in this sector.

We are seniors (75 & 80) and the stocks referred to are in a RRIF.

Your thoughts? Thanks!

Q: Portfolio Analytics indicates that across our accounts, we are overweight in the Financial Services sector. In order to free up some cash for under=represented sectors, my thinking is to reduce TD enough to achieve the target amount. I'm a bit uneasy with some of the recent negative issues with TD, but still would like to keep some due to its wide moat and 5i's opinion that perhaps its "problems" have been overplayed. Would you concur with my strategy? Thanks.