Year: 2012

CP and CNR

Hamilton

cp dec 2012 bcp dec 2012 s

We have been completely wrong on both CP and CNR (see under CNR). Both have behaved like runaway trains far exceeding our expectations. CP is now trading at a p/e close to 24 and a yield of about 1.5% The new boss has just announced his plans to get the operating ratio down another 10 points, the recipe is the usual one, fire a quarter of the workforce and announce it just before X-mas. Just like in that famous movie that is always played over and over around this time -  the new boss even fits in well – , this may ultimately backfire. Even the analyst at RBCDS is looking for a double digit drop. The scary part is that this situation demonstrates clearly to what extent a hedge fund can actively muscle its way into the running of a company, perhaps a good thing at certain times, perhaps not when it is a little overdone. This is a sell on the next bounce.

Germany, the DAX and EWG, total return–, price weighted–or capital weighted Indices.

Hamilton

ewg dec 2012DAX dec 2012

At a glance the DAX, on the right, has substantially outperformed the EWG, MSCI Germany ETF. Most stocks in that ETF are also in the DAX so why the difference? Simple put one is an apple and the other an orange. The DAX at about 7500 is 500 points or 6.25 % below the two previous peaks, the most recent one in early 2007, almost 6 years ago.   The EWG, at about $24 is roughly $12 or 34% below the high at the end of 2006, about 5 years ago. The difference is an eye-catching 28% but Germany is Germany and Siemens is Siemens. The difference is that the DAX index is a total return index and therefore includes all dividends earned and compounds them, which at 3% dividend adds up to an additional return of about 20% over 6 years. The S&P is also a total return index, as is the Russell and a few others. The DOW has its own peculiarities in that it is price-weighted.

For indices that contain mostly non dividend paying stocks the difference should be negligible, but this is not true if there are big stock by-backs. The moral of the story, compare apples with apples and know your fruits. By the way, the TSX is not a total return index!

TPX, Tempur-Pedic Intl. update

Hamilton

TPX dec 2012

Back on June 7, we opined that this stock was a buy for a rebound of $10 to $15. The low that day had been $21.05, a week or two later it bettered that by 35 cents by hitting $20.70 It opened the next day at $22.84 so for score keeping purposes we will assume that you bought it at that level. $12.5 higher (the midpoint or average of $10 to $15) is at $35.34, below the high of $36.11, good for a gain of 55% in 3 months.

I have no idea where it goes from here but I do suspect that we are about to complete a b-wave in a a-b-c correction that could close the entire gap by going to about $42. Not terrible sure about that so the step-aside recommendation fits best, for the moment.

CWT.un Calloway Real Estate Investment Trust update.

Hamilton

cwt,un dec 2012

We always seem to underestimate the forces that are brought to bear on stocks to push them up. We were wrong in thinking that this stock was a sell at about $27 back in early July as, unexpectedly , the stock did manage to add the extra $4 to double top and then some. But nothing has changed so the outlook remains the same. Theoretically , of course, a valid argument can be made that this stock should trade at higher, if not much higher, valuations than it did back in 2006 when interest rates were also relatively low but double what they are today. But then the market is always supposedly forward looking so the boost from the discount rate may itself be discounted.