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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: Hi, TOY is a constituent of 5i Portfolios for a long time and it would also be fair to believe that this company is owned by a large number of 5i members. Recent bankruptcy of Toys r' us us cast a gloomy shadow on all toy manufactures and caused a huge uncertainty as to what is the near and long term impact and how each company is handling it. Your recent comments have addressed members' concerns to a good extent. But, is it possible for your team to do an analysis of the situation with specific reference to TOY, covering issues like, non-receipt of receivables, loss of sales, alternate marketing channels and company's relationship and past experience with them, near and long term anticipated impact on profitability. Also how is it likely to influence the growth projections in Canada, US and international markets. If it is possible to seek some clarity from the company, it would be really helpful. Toys r'us Canadian operations, reportedly have been agreed to be bought by a group. How does it impact ( positive or no impact) Spin Master.

Also based on your analysis and T/A, do you see more pressure on stock in near term and at what level you consider it to be a Screaming Buy. Thank you so much !!!
Read Answer Asked by rajeev on March 19, 2018
Q: An earlier question on TOY mentioned the downgrade (BMO) as being a possible factor in the decline in stock price. Just to balance the ledger and as can be seen below, while there was one downgrade, there were in fact 6 upgrades. This is why last week's decline seems to be pretty irrational, especially given how quickly TOY recovered following the initial Toys R Us negative news from a couple of months ago.
As always, keep up the great work.

3/9/2018 Raymond James Financial Boost Price Target Outperform C$57.00 -> C$65.00
3/9/2018 CIBC Boost Price Target C$58.00 -> C$63.00
3/9/2018 Royal Bank of Canada Boost Price Target Outperform C$61.00 -> C$66.00
3/9/2018 TD Securities Boost Price Target Buy C$61.00 -> C$69.00
3/9/2018 BMO Capital Markets Downgrade Outperform -> Market Perform
3/8/2018 National Bank Financial Boost Price Target Outperform C$63.00 -> C$65.00
3/6/2018 Canaccord Genuity Boost Price Target C$53.00 -> C$63.00

Read Answer Asked by karl on March 19, 2018
Q: If you had to pick one out of those two stocks for 1 to 2 year outlook, which one would you pick? I realized that ENB is more of a utility and more interest rate sensitive, but still is related to the oil industry. Both stocks have been beaten down, but wandering which one in your opinion would have more upside if oil starts moving up? Thanks for the great service.
Read Answer Asked by Jacques on March 19, 2018
Q: GUD continues to go nowhere, and mostly down of late. It's been probably over 2 years that the story has been the same. Have patience and wait for Goodman to spend some of his $775m hoard. Recent earnings were underwhelming. Do you still feel the same way about GUD's prospects? Is there any thought of removing it from the portfolio due to it being a non-performer?
Read Answer Asked on March 19, 2018
Q: Peter,
Your column in the National Post this weekend - "Keys to being a good investor" is a tour de force. I have cut it out and vowed I will read it every day til the lessons you have provided are embedded in my brain. And your line: "we have met very few rich short-sellers" is a beauty.

Thank you so much!

Peter
Read Answer Asked by Peter on March 19, 2018
Q: I need to unload one of the 5 big banks. How do you rate the 5 on a scale from best (keep) down to "worst" (sell)? Thanks for the continuing great service!
Read Answer Asked by Chris on March 19, 2018
Q: hi folks:

not a question; just a PSA for the membership

executive summary: mgmt is likely the most important issue when buying shares in a business

in the case of EFN (as with newcourt) it sure seems like mr Hudson learned nothing

a sad loss of capital

(this from august 2015 )
Asked by Robert on August 27, 2015
Q: hi folks
further to an earlier email on element with respect to mgmt
I remember when newcourt and steve hudson had their heyday in financing in the 1990's and early 2000's

from my recollection there was a lot of 'creative accounting' (a term updated recently to "financial engineering")

question: in light of this 2.2BB issue today (which increases the company capital structure by almost 40%) what makes anyone believe that this mgmt is any more competent than when they near bankrupted newcourt?

one thing of interest being they didn't borrow the whole 2.2bb

comments?

thanks for your insight

robert

5i Research Answer:
Element learned some very good lessons at Newcourt, and has not repeated them in companies since. It was not perfect, but if management takes away valuable lessons we can still support them (Tourmaline management had some issues at Berkley Petroleum in the 1990s, and learned lessons there also). While the ending was not what some expected, keep in mind that Newcourt was still successfully sold (for more than $2.4 billion). We have quoted a Globe article below: We think the key is the short term borrowing switch. This issue does underscore that shift.

Mr. Hudson says he has learned his lessons from Newcourt. Don't expand too fast with acquisitions. Use the most conservative accounting. And perhaps most crucially, don't borrow short-term and lend long-term.

Newcourt funded itself in the commercial paper market, borrowing for a few days or weeks at a time, while lending money for months or years. As a result, the company constantly had to roll over its financing. When markets shut down because of a financial crisis in Russia and Asia, Newcourt was on thin ice.



Read Answer Asked by Robert on March 18, 2018
Q: This is a comment, not a question. Just read your article in the Calgary Herald "Five Keys to Being a Good Investor". I was in the business until retiring a few years ago and your 5 points are so true! Keep up the good work!
Read Answer Asked by Rick on March 18, 2018
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