Q: For me a large individual stock position is 5-7% ..... Though I may go larger on an ETF ...... And I hold a 5.16% position in GSY ...... The question now is whether to reduce that position to my comfort level for speculative stocks { 2.5 % } or get rid of it altogether ..... The knock on both PRL and GSY currently is delinquent loans ..... So I tend to look at economic conditions that may rectify that . Unemployment and inflation are the only two factors that I see that would create that situation { a financially strapped borrower } ..... In the short to mid term I don't see the economic conditions in Canada that will help either unemployment or inflation ...... Yank tariffs are going to be a detriment to both { and we haven't even begun to see tariff effects in quarterly reports } ...... I don't see any reason the next few quarters should show any improvement in delinquencies ..... Tell me why I am wrong and should stay the course with GSY ? ...... Thanks for your terrific service ........
5i Research Answer:
With shares being down in the 17% range after the release, and weakness heading into earnings, we think a lot of bad news is getting priced in at this stage. GSY has been around for a long time and has managed through numerous types of environments, so we don't see much reason to think this one will be any different nor are we convinced that there is a 'severe' issue at hand at this point in time. Economic growth might be seeing a bit of a slowdown but we think they can (and have in the past) manage a slowdown fine.