skip to content
  1. Home
  2. >
  3. Investment Q&A
You can view 3 more answers this month. Sign up for a free trial for unlimited access.

Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Which of the BN subsidiaries do you think offers the best overall return profile over the next 5-10 years and why.

Many Thanks
Scott
Read Answer Asked by Scott on January 30, 2024
Q: Hi - of these two, which do you prefer for a growth mindset. Having said that, please feel free to say that you wouldn't invest in either at this time/prices. Lastly, do you see a possibility for AGF to be taken over (obviously with the blessing of the Goldring Family).
Read Answer Asked by Doug on January 30, 2024
Q: In some answers, you have referred to some lending companies being exposed to a "rate risk". I am not clear what that is / when it will impact a lending company. More specific to GSY....is it exposed to a rate risk? How will anticipated falling rates affect it? I know that new highs ( or at lest here a recent one) do not concern you but given its run up in recent months, are its valuation metrics still looking favourable?
Thanks for your excellent service.
Read Answer Asked by Leonard on January 29, 2024
Q: Hi, Referencing the recent questions on GSY, here is some color from CIBC on the rationale for their Downgrade to Neutral. Please publish, at your discretion, with or without your comments.

"Downgrading Go Easy To Neutral"

"After reviewing draft regulations for the new interest rate cap, it has come to
our attention that a consultation process was recently completed examining a
further reduction to the rate cap. The timing of the consultation was much
earlier than expected, and we are left to wonder if it was scheduled
intentionally to conclude in advance of the 2024 Budget. We have no basis to
speculate on the outcome and no proprietary insight on the decision-making
process of the Finance Minister’s office. However, we fear that a political lens
might be more appropriate in assessing the probability of further action on the
interest rate cap than an academic one. There has clearly been some forward
progress on this file and it simply doesn’t feel prudent to maintain an
Outperformer rating on goeasy in advance of the Budget. We are
downgrading GSY to Neutral and maintain our $160 price target.

Our concern, however, is that decisions of this nature can sometimes be influenced by the desire to achieve political objectives rather than engage in a balanced assessment of a complicated issue. The considerations described above did not prevent the government from taking action on the initial reduction to the interest rate cap, and our concern is that it may not stop it from taking action to reduce the rate cap further.

We believe that the first sentence of the draft regulations may be somewhat revealing regarding the federal government’s sentiment towards instalment lenders:
“Predatory lenders take advantage of some of the most vulnerable people in our communities, including low-income Canadians, newcomers to Canada, and those with limited credit history—often by extending very high interest rate loans.” Describing instalment lenders as “predatory” sounds almost adversarial or outright hostile, in our view.

Bottom Line

In our view, the range of potential outcomes appears to be skewed asymmetrically negative. On the one hand, the federal government could elect to take no action and this would become a non-event to shares of goeasy. At the time of writing, we believe that this outcome is already priced into the stock. GSY shares have run up nearly 50% since late October (i.e., the same month that consultations were launched) and the P/E multiple has normalized back towards long-term averages (see the line chart in Exhibit 3). This suggests to us that there is little evidence that public market shareholders are bracing for an adverse outcome.
On the other hand, the federal government could take a heavy-handed approach and reduce the rate cap further. In this scenario, the magnitude of almost any reduction would likely be meaningful to the earnings power of GSY. "
Read Answer Asked by rajeev on January 29, 2024
Q: Please compare the first two with BAM. Seems they have much higher dividends, and lower valuation. Would you comfortable to pick one today for a long term investing? Thank you!
Read Answer Asked by David on January 24, 2024
Q: One of the more recent questions by Kel was for 5i to rank the 11 sectors in 2024. I noticed that real estate was ranked last.

I've also noticed that 5i seems like to like stocks like BN (Brookfield Corp)

Can you advise how these two views compare?
Read Answer Asked by Mike on January 22, 2024
Q: I've owned SLF for a number of years. I'm considering the switch to IFC as done in the balanced portfolio. I get a DRIP from SLF each quarter. With the amount of money i have invested i would not get a DRIP from IFC. How much weight would you put on this to favour staying with SLF?
Read Answer Asked by Matthew on January 18, 2024
Looking for more? Sign up for a FREE 14 day trial! No credit card required

We invite you to sign up for a 14 day free trial of 5i Research!
Experience all the benefits and tools we have to offer; stock research, model portfolios, Q&A with our experts, and so much more. Join a community of like-minded investors today!