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Investment Q&A

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

Q: ".. priced US$400 million aggregate principal amount of 7.625% senior unsecured notes due 2029" ..... "goeasy intends to use the proceeds from the sale of the Notes to partially repay indebtedness under its secured facilities and for general corporate purposes"

I suspect they are just taking care of business here. I thought their debts were not particularly large considering their business. Thoughts or reassurances plse.
Read Answer Asked by Stephen on February 21, 2024
Q: What are your top buys (3) right now if you were investing in a mix of growth, quality, and somewhat reasonable valuation? With your answer/explanation can you include fwd p/e or whatever relevant metrics vs peers?

Also, what's a quality stock or two you'd like to buy but would want to see come down a bit/something you'd be looking to pick up in a broad market selloff?
Read Answer Asked by Max on February 20, 2024
Q: Hi Team,
This is more of a general comment , discussion on Gsy valuation. Is it just me or the earnings growth this company is putting out in relation to its p/e seems incredibly cheap. Looking at their history , quarter after quarter continues to be record and shows the most stable growth out of any of my holdings on a long term basis. The ceo really seems to know what he’s doing here. I think this should be a $1000 stock within 8-10yrs of growth remains as is and they are given a fair multiple in the market. Am I crazy to think this ? This isn’t even accounting for their new growth initiatives such as the credit cards they are going to probably be rolling out, or expansion into the US. Just looking for your thoughts on this and what might prompt the market to start recognizing the stock fairly in regards to valuation ? Thanks

Read Answer Asked by Shane on February 16, 2024
Q: I guess this is really a basic tax loss question. I wish to sell BNS in my non registered account which is mainly full of large dividend paying companies. Does it make sense to sell GSY ( at a profit ) , sell BNS ( at a loss ) and then rebuy GSY , thus taking advantage of tax loss provisions. It will also give me the advantage of a higher cost price for GSY for the inevitable sale. Should I do this procedure with the stock that has the most comparable gain to my BNS loss ?
Thanks. Derek.
Read Answer Asked by Derek on February 12, 2024
Q: Hello Peter and 5i team,
My TFSA contains the aforementioned stocks in roughly even percentages except for nominal investments in Park Lawn and DRX. I would like to make my annual contribution to one or some of these companies and would like to know what your order of preference would be for buys/adds at this time. Please also include Celestica in your considerations.
Also, are there any companies in this list that you would consider undervalued at this time?
Thank you.
Read Answer Asked by Bob on January 29, 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 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