Q: Hi Peter, Ryan, and Team,
I and others have recently commented on Parkland's relatively poor performance lately. PKI is held in our son's TFSA (which I manage). Being reluctant to sell at a loss, I've held off, hoping for better days ahead.
I found this analysis (from National Bank Direct Brokerage) and am curious if you agree with their assessment, or should we take our lumps and move on?
Could changing the sector index help PKI?
We note that PKI is classified in the S&P TSX Energy Index, which could be
misplaced given that retail constitutes >40% of its business. In our view, PKI’s
share underperformance is related, in part, to fund flow imbalance (given
that PKI doesn’t benefit from rising commodity prices). We further note
that many peers, including Alimentation Couche-Tard, Casey’s and Murphy
USA, are in the Consumer Index (either Discretionary or Staples). With a
growing non-fuel business (including the recent M&M acquisition), sector
reclassification for PKI to the Consumer Index could direct investor focus
more toward PKI's operational performance versus commodity exposure (it
could also help to reduce share price volatility in the long term). We remain
constructive on PKI given ongoing end-market recovery, attractive valuation,
and anticipated future accretive acquisitions.
Thanks in advance for your continued help as we navigate this difficult market.
I and others have recently commented on Parkland's relatively poor performance lately. PKI is held in our son's TFSA (which I manage). Being reluctant to sell at a loss, I've held off, hoping for better days ahead.
I found this analysis (from National Bank Direct Brokerage) and am curious if you agree with their assessment, or should we take our lumps and move on?
Could changing the sector index help PKI?
We note that PKI is classified in the S&P TSX Energy Index, which could be
misplaced given that retail constitutes >40% of its business. In our view, PKI’s
share underperformance is related, in part, to fund flow imbalance (given
that PKI doesn’t benefit from rising commodity prices). We further note
that many peers, including Alimentation Couche-Tard, Casey’s and Murphy
USA, are in the Consumer Index (either Discretionary or Staples). With a
growing non-fuel business (including the recent M&M acquisition), sector
reclassification for PKI to the Consumer Index could direct investor focus
more toward PKI's operational performance versus commodity exposure (it
could also help to reduce share price volatility in the long term). We remain
constructive on PKI given ongoing end-market recovery, attractive valuation,
and anticipated future accretive acquisitions.
Thanks in advance for your continued help as we navigate this difficult market.
