Royal Trust anyone?
Cohodes is a short seller who has been very vocal with criticisms of Home Capital Group and especially their poor underwriting standards
Thankfully for all of us, this researcher has helped with market price discovery. The market has also rewarded him handsomely for his fundamental research with about 60% profit short the stock since 2014.
The HCG scandal is similar to US problems with ninja loans and falsification
In the US, just a handful of years ago we saw that poor lending standards and fraud go hand in hand. Management encourages reckless behaviour and covers it up, because the reckless lending boosts short term profits and boosts compensation, especially bonuses for management and executives. I'm sure the same thing is happening in Canada, though I have no proof.
Last edited by james4beach; 2017-04-20 at 11:54 AM.
So the next question becomes; can you prick the real estate bubble by allowing a high risk lender to fail?
Quite happy I sold my shares at $36.30. I actually don't think the damage from the business with bad brokers is damaging to the company. Those loans have actually been very profitable for the company even if they were falsified. As well, these brokers are gone, so you could potentially have more confidence in HCG's book moving forward. The real concern is just that they're not growing their business (competition?) and that there could be reputation damage. The OSC investigation is probably not even material even with maximum fines. It's just that their underlying business might not be good; with Toronto's market booming, their business should be booming. It is at Equitable at least, for example, and First National.
Last edited by doctrine; 2017-04-20 at 05:03 PM.
The stock chart for HCG screams: "I'm toast"
Not something I buy here but they actually have marketable assets so far from "toast".
I think my assessment was pretty accurate. I also said this:If it drops below $23, watch out below.