Q: I know you have done this before, but with reference to recent results for both companies, could you compare and rank these two companies. TOI gets a higher grade A- on your most recent report, and LMN gets a B+. As I read through the responses to questions, it seems that LMN is preferred, but I thought TOI's results were better than LMNs. But I must confess I do not understand some of the "preferred" charges. It appears that LMN suffered a huge loss. I realize that both are long term investments, but I'm just trying to get a sense of portfolio allotments. Thank you for fantastic service, as always.
5i Research Answer:
There is a trade off. We think LMN has more upside potential, especially as TOI's European focus will likely be a headwind for it for a while. But LMN is also significantly smaller (1/6th) and should be considered higher risk. The ratings try to address this. We have comments on earnings on both posted now in the Q&A. The preferred charge is a non-cash charge related to the conversion of CSU's interest in the company. No cash is exchanged, and it is only an accounting loss for one period only. As the calendar moves forward, comparisons will be better as there will be no such charges. We essentially consider it a non-event related to how CSU accounted for its ownership position in the companies.