Hey Bill Ackman, why not short Tesla?


Elon Musk is not a fan of Donald Trump, yet he pulled a classic bait and switch this past week. I for one have lost track of how much money he’s lost and the number of promises he’s broken. I can’t explain why someone would voluntarily pay a deposit for a car that has no set delivery date. I guess these are the same people who pay $1300 for a piece of glass that is used more for games than as a phone. I digress. So instead of concentrating on maximizing production to fill orders for existing customers, Elon diverts attention from all his failings and problems by throwing up another shiny ball. Actually is was two balls this time. An Electric Semi and a Roadster that are both cost prohibitive and unnecessary.

Elon is a smart guy but is not focused nor a business person. He is more suited as the head of R&D than the head of a large corporation. This is more ammunition for those with the capital and will to pull off a sure bet. Shorting Tesla is  a no-brainer. The only catch is having the resources to do it.

What do you say Bill?

 

 

Bombardier-A an example of why welfare does not work

This is a family run company who’s only raison d’etre is to make themselves wealthier, and provide votes for Quebec friendly politicians. All this is at the expense of the Dumb Canadian Taxpayer. Yes I say dumb because no one ever really cares until it affects them personally.

When something is given to you without you earning it, do you really value it? It’s like finding a $20 bill on the sidewalk. Do rush to the bank to save it , do you use it to pay a bill or do you spend it right away?

We as a country and Quebec as a Province have poured billions into a company that does not care about those outside its class A structure. If it did, it would have made profits and been profitable at any cost. Instead, they know that they will be propped up by different levels of government in the name of saving Canadian Jobs. If you did the math, we could have funded a national drug program or a national daycare program with all the lost funds poured into Bombardier.

Now, because there were no strings attached with our money, they went looking for another Sugar Daddy in Airbus. Airbus is a shrewd company who paid nothing for the deal and got all the Intellectual Property that we as Canadians paid for.

Welfare is something for nothing. You (and we as a Country) get what you pay for. Remember this next time you’re at the voting booth.

Rick Barbosa

 

Can you sit still?

Recently, we’ve increased our positions in a few key holdings including CIBC, Genworth Mortgage Insurance and Blackberry. Initially the returns were positive, lately, based on the news cycle or lack thereof, their values have decreased somewhat. Nothing materially has changed for either one of these holdings, including Blackberry, which made an unexpected profit even when you back out the Qualcomm payment.

Analysts are paid to overreact, we do not. These businesses are sound, make money, and will make more money.

Our Criteria for investing is simple:

  1. Good or Service is Vital (Need)
  2. High Barriers to entry (Financial moat)
  3. Good Management
  4. Strong Balance Sheet and Cash position

The true mark of an investor versus a trader is how long they can sit still when things are not going in their favour at the moment. If you panic and “limit your losses” you are a trader, if you believe in your analysis and see these swings as temporary, then you are an investor. Limiting your losses also means wiping out future returns.

Stay Calm and Carry on.

Rick Barbosa

 

4 Pillars of Building Wealth

Believe it or not, the manner in which you can build your nest egg hasn’t changed since the dawn of the 20th century. The tools may have improved but these foundational pillars still exist.

  1. Discipline – Stay true to your purpose and never lose sight of your goal.
  2. Save – Learn how to keep and grow your money
  3. Research – The best results come from the most informed decisions.
  4. Plan – Anticipate life, surprises, retirement, and set out to meet these obligations.

Contact us to learn how to use these tools and start building your wealth.

Rick Barbosa

 

BBT Financial Update 10 days ahead of Barclays Analyst

Our clients enjoyed a 10 day window to buy up depressed stocks from our client update on May 12th. See the Barclays post below:

BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook

23 May 2017 – Reuters

BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook** Barclays raised its outlook on 5 Canadian banks due to low valuations following Q1 results

** Analyst John Aiken writes depressed valuation also attributable to housing market worries arising from non-bank lender Home Capital Group’s rapid decline in deposit accounts
** Cites upcoming switch to 2018 valuation year as painting rosier earnings growth outlook
** Among ‘big 6,’ raises Bank of Montreal to equal weight from under weight, PT to $98 from $95
** Lifts Bank of Nova Scotia to overweight from equal weight, PT to $84 from $78
** Upgrades National Bank of Canada to overweight from equal weight, PT unchanged at $59
** Boosts TD Bank Group to equal weight from under weight, PT to $69 from $64
** Also raises regional bank Laurentian to equal weight from under weight, though trims PT to $58 from $59
** In last 12 months, banks have outperformed the broader Canadian equities market, with the Thomson Reuters Canada Banks Index up 14.9 pct vs. the TSX Composite (up 11.1 pct)

Even with the BMO earnings today,  we see a buying opportunity.

Our Call 05/24/17
We predict that enough republicans will vote for impeachment before US Thanksgiving, leading to further depressed values for banks in the US. Canadian Banks should see continued strength as safe havens. Oil will bounce higher despite incremental supply. Overall infrastructure spending will boost oil demand over the next 2 years so hold on or add to your energy stocks.

Rick Barbosa

 

Client Update 05.12.17

The recent Home Capital transparency issue, and now the downgrade from Moody’s on Canadian Banks has supressed valuations recently. We personally have GIC’s with Home Trust that are coming due.  Although we don’t envision investing in the Company, (once trust is an issue) we do anticipate adding to our CIBC and Genworth positions. Canadian Banks and non-sub prime lenders do a great job of valuing risk, even in this environment. Canadian banks do not write risky loans, you’d know if you’ve ever tried to borrow from them. Hence we see this as a buying opportunity.

Tip Sheet

CIBC  (CM) Close 107.29
P/E Ratio 9.1
Book Value 1.8
Debt to Capital 4%
Dividend 4.73%

Genworth Mortgage Insurance (MIC) Close 33.48
P/E Ratio 7.1
Book Value  .8
Debt to capital 10.3%
Dividend 5.26%

For more portfolio advice, Look up Rick’s Pick’s Page

For individual portfolio management contact our office.

Government intervention in Rent Controls will back fire

Lately, there has been increasing pressure for government intervention in establishing rent controls on newer purpose-built rental properties.  The current market fuelled by low-interest rates and just plain stupidity, is causing unsustainable demand. When this happens greed steps in. Unfortunately, some people will get hurt when greed rears its head. Trying to intervene by legislation will mean that developers and landlords will adapt. They will either cut back on maintenance, stop building new projects, or add other fees to make up the difference. Whenever we intervene in a market we are picking sides, meaning that one side gets disadvantaged. There are repercussions. Historically Governments have done more damage when they pick winners than if the market does. I could list several examples but that would take too long.

We need to let nature take its course. No one has long-term memories anymore. But those of us who study history know better. This market will crash and the problems that have come with it will correct themselves, albeit in a dramatic fashion. You need to let people fail so that they learn from their mistakes. If there was no idiotic demand and speculation, prices and rents could not be met.

Keep the market free… and remember, those who fail to remember history are doomed to repeat it.

Rick Barbosa