# AutoCanada Inc. (ACQ.TO)



## Jungle

Saw this posted on financialwebring by Opsyeagle. I would like anyones thoughts and opinions on this company. They operate 23 car dealerships accross Canada. (Cyclical, I know)

Recently, Q3 profits more than doubles, dividend raised 20% now. Annual dividend 11% !! P/E is 7.7 

Thoughts?


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## ddkay

I think there's some good value here, but technically speaking price is in a megadowntrend


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## OptsyEagle

Don't expect a lot of growth from the company since it has indicated that it doesn't see much expansion from new dealerships in the near future. For some reason the auto makers don't like giving new dealerships to public companies anymore.

The good news is that the CEO (also the largest shareholder) has decided to significantly boost the dividends to shareholders since the current network of dealerships it owns spin off a ton of cash flow and it doesn't need it for growth.

It is well financed, is growing internally and currently sports an 11% yield. This yield is produced from a 46% payout ratio if you use the last few quarters of income and about a 30% payout ratio when looking at free cash flow per share.

The stock currently trades for 4.2 times earnings. This is what it did in Q3:

AutoCanada
2011 Third Quarter Operating Results 

• Revenue increased 16.8% or $38.8 million to $270.1 million 
• Gross profit increased by 17.8% or $6.7 million to $44.7 million 
• Same store revenue increased by 21.6% or $46.5 million 
• Same store gross profit increased by 22.9% or $8.2 million 
• EBITDA increased by 104.8% to $8.2 million from $4.0 million 
• Pre-tax earnings increased by 155.6% to $6.9 million from $2.7 million 
• Net earnings increased by 163.7% to $5.2 million from $2.0 million 
• The number of new vehicles retailed increased by 16.3% 
• The number of used vehicles retailed increased by 11.2% 
• Repair orders completed for the quarter decreased by 1.4% 
• Parts, service and collision repair gross profit increased 3.5%


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## FrugalTrader

Big 12% gap up this morning. Perhaps the CMF effect?


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## OptsyEagle

Not bad. What I think is interesting about this stock is that it has actually been undervalued for quite a long time, while it just plugged along. It had some issues during the last recession but it's repair business proved to be a reasonably good hedge that the stock market seems to have ignored.

My opinion is, as ddkay has indicated, the only thing keeping it from going up is that it hasn't already gone up. When a stock has an 11% yield and trades at 4.2 x EPS, investors get skeptical.

I suspect that when this stock eventually doubles, and sports a 5.5% yield and trades at 8.4 x EPS, all with a 46% payout ratio and growing sales and profits, investors will feel more comfortable buying it then, then they do right now. As ddkay may say, it would then also have a good chart.

I have noticed, over my investing years, that the lion's share of investors prefer to wait until a stock has already gone up, before they make their first purchase. In any event, 11% dividend is not to bad, while one waits for that.


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## Jungle

Wow up 12.5% today now.


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## ddkay

Very abnormal move, ~200K went into the stock today. It may have broken out but now it's extremely overbought. I would wait for the week to pass for confirmation this thing has reversed direction. On my watchlist!


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## Bullseye

FrugalTrader said:


> Big 12% gap up this morning. Perhaps the CMF effect?


Certainly not the first time I've seen a stock pumped on here or FWF go on a tear right afterwards. I think these forums get a lot more quiet readers than they do active posters, and it does have an impact in small lesser known stocks like this. 

I'd be curious to see the 'view' count on this thread.


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## Spudd

The number of views is listed on the main forum page. It was 158 when I clicked to make this reply. Hardly seems like enough to make an impact on the stock market.


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## ddkay

This is why I prefer trading the index, too many scams going on in individual names


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## Bullseye

Spudd said:


> The number of views is listed on the main forum page. It was 158 when I clicked to make this reply. Hardly seems like enough to make an impact on the stock market.


Recent normal volume on this stock seems to be in the 1,000-10,000 shares per day range, so it could certainly be moved by a few dozen readers here all deciding to buy at once. Volume yesterday was 80,000.


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## OptsyEagle

Stocks still going up. They just acquired another 2 dealerships (Voltswagen dealerships) so I guess I was wrong on their difficulty in growing out their network.

Keep in mind that although AutoCanada's dividends are quite high (8.7% yield) they will still only amount to $2.4 million dollars this quarter. They generated $10.2 million of free cash flow (cash available after maintenance capital) in the last quarter. This leaves plenty of money in the coffers for future investments, acquisitions and working capital. Or they may repay debt with it or pay it out in future or special dividends.

Anyway you look at it, this sucker is cheap.


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## ddkay

What a monster! Up 30% since this thread started...

Hey KaeJS if you're reading this thread, go back 1 page look at post #7 and tell me what do you see?


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## ddkay

Hope for a little pull back tomorrow, placing bids at 5.43 and might snap some of this up


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## CanadianCapitalist

OptsyEagle, is this another Fortress Paper in the making?


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## OptsyEagle

I hope it is a Fortress Paper.

The main difference for me is that I would give AutoCanada about a 100% growth potential from here, unless new opportunities arise. 

Fortress Paper's potential, however, far exceeds that.


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## ddkay

No fill yet  maybe tomorrow, this thing has barely had a breather it should come down to at least 5.40s or lower 5s. It can just as easily lose half of its value over night though so buyers gotta be careful.


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## ddkay

I'm pulling my bid for now, need clarity on the macro situation, financials are still weak and we could see a 2008 scenario soon


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## humble_pie

just askin. Who you guys planning to sell to.


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## Bullseye

ddkay said:


> I'm pulling my bid for now, need clarity on the macro situation, financials are still weak and we could see a 2008 scenario soon


You changed your investment plan with this stock in 11 minutes??


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## ddkay

On a stock that can and has gone to 61 cents less than 3 years ago, yes 

I was semi bullish last night, considered there might be another coordinated global government prop-up market intervention before month end, but not anymore

ACQ really should be showing more consolidation right now, I don't like that it was up and now flat on a down day


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## OptsyEagle

ddkay said:


> On a stock that can and has gone to 61 cents less than 3 years ago, yes
> 
> I was semi bullish last night, considered there might be another coordinated global government prop-up market intervention before month end, but not anymore
> 
> ACQ really should be showing more consolidation right now, I don't like that it was up and now flat on a down day


So the problem is that it has been almost a 10 bagger in the last 3 years and it is showing too much relative strength by being up to flat during a major downdraft in the stock market.

This idea you have that it should be consolidating or what not. Is there a chance that you might be wrong on that? Has that been considered?

As for Europe and that mess. You do know that you will inevitably pay a very high price for a rosy future. Are you sure you want to wait for that. Europe is not nearly as risky as a high stock price will be.

Anyway, I am starting to sound like a car salesman here and that is not my intent. Just want to give another perspective on this. Always know that if this one passes you by I am sure another opportunity will be along shortly.


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## ddkay

Overlay the SPX on ACQ, it's got like 95% correlation over a 3Y period, with a few positive divergences. High beta reading suggests similar. Don't get me wrong, I still like the stock, there's great value here, but I'm not comfortable leaving money on the table overnight (not just ACQ) until EU has even a temporary fix.


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## OptsyEagle

The stock still has a 7.5% yield, 30% payout ratio, very little debt and me thinks she's going to $10. I may be wrong on the latter, but the 7.5% yield is certainly a reality.

Stocks still going up.


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## jamesbe

I hope you are right, I couldn't get in yesterday at $6, but go in today at $6.40 for a prompt drop to $6.30 DOH


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## OptsyEagle

Oh oh. I think you misunderstood the strategy. When I like a stock, I think you are supposed to short it. lol.

Anyway, my money is right there beside yours. Enjoy the dividend.


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## jamesbe

Lol, nano didn't put much in, just enough for a useful dividend. I'll hold it for awhile, if it does hit $10 I'll sell it, of it doesn't I'll hold it forever or untl things look bad.

I'm actually in the car biz, they have a bunch of good brands and not many stinkers which should mean better sales.


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## OptsyEagle

Another thing that I think may help their business going forward is a while back I read an article that indicated that the old traditional mom and pop car repair garages will likely go the way of the dinosaur. The article alluded to the fact that with most new cars today a repair shop needs a considerable amount of specific equipment for many of the newer models.

Most of this equipment will be found at the individual dealerships. For them it is cost effective but for the independant garages it makes for too much of an investment. I know I tried to get a transmission fluid change at a Speedy Muffler for my Ford Escape and they told me that only the dealer could do this job.

Anyway, AutoCanada's business seems to be thriving anyways, but this type of boost to their repair business certainly cannot hurt. Also gives them some pricing power. I doubt I got a great deal on my tranny flush when most of the traditional competition was shut out from bidding.


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## OptsyEagle

AutoCanada just blasted through $7.00, hopefully on it's way to $10. The only downside to this is that the 11% yield with the 30% payout ratio I referred to back in November, has now shrunk to a 6.6% yield.

No problem. 6.6% yield is still a pretty good dividend and since Chrysler had one of the largest sales increases in Canada last year and over half of AutoCanada's dealerships are Chrysler, I would imagine a dividend increase in 2012 shoulds be in the cards. They just acquired 2 new Voltswagen dealership at the end of last year that should also give a boost in and around the second half of 2012, as well.


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## jamesbe

I bought in, in the low 6's enjoying this .


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## doctrine

I bought 820 shares at $6.30 and going to hold on. Thanks to CMF for giving me this idea, as soon as I looked at the reports it was an almost instant buy


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## CanadianCapitalist

Another brilliant pick Optsy! You are batting 1.000 now.


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## OptsyEagle

Chrysler posted a 22% increase in sales in Canada, in 2011. Obviously we are seeing a very high demand for their product.

http://www.theglobeandmail.com/glob...nada-sales-rise-22-in-january/article2322263/

The better news is ... those cars are not going to sell themselves. Almost half of AutoCanada's dealerships are Chrysler. 2012 is looking pretty good from here.


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## jamesbe

I'm in the car Biz, Chrysler is looking up for sure. And with so many $19,995 minivans to sell business should be good.

The Fiat 500's though are not doing so great, but RAM and Jeep are doing well.


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## OptsyEagle

AutoCanada just increased their dividend by 17%. It now yields a little under 8% and the payout ratio is only about 55% and only 35% when compared to their free cash flow. Low debt, simple business ... what's not to like.

http://finance.yahoo.com/news/AutoCanada-Inc-Announces-cnw-1253260188.html?x=0


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## jamesbe

Chaching!


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## PMREdmonton

Big pop today.

I tried to put in an order early in the morning but it ran away from me. I already have 400 shares in my son's RESP but was hoping to get a few more.


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## riseofamillionaire

This is a stock I don't own, yet I want to buy real bad. Possibly my next position


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## jamesbe

I can't believe I'm up 20% on this!


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## jamesbe

Up nearly 6% today!


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## OptsyEagle

Yes. I am pretty confident that the 4th quarter numbers are going to be quite good and surprising. I have 2 reasons that make me believe this will be the case. 

1stly, Auto sales have been great in the 4th quarter and as I have always said, those cars do not sell themselves. Chryslers numbers have been the best and almost 1/2 of ACQ's dealerships are Chrylser.

2nd reason is because they just raised their dividend again a few weeks ago. Their yield was already very high, so I doubt they would have done this unless they see some very good, sustainable sales and profits. If they didn't they would most likely have waited until they issued the quarterly report and then announce the dividend at the same time to cushion investors reactions. The fact that they decided not to combine the dividend increase with the issuance of the 4th quarter report makes me feel that the 4th quarter report will not need any help.

Just my opinion.


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## jamesbe

Whoa crazy! It's flying! Geez I was just a long hold on this but now I'm second guessing myself thinking, cash out and go back in a little later...


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## marina628

So the question should be what are we buying Jungle for Christmas since he put this on our radar lol


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## doctrine

Unfortunately, an analyst at TD securities just started coverage. 

I'd really like to add but now I'm not sure at what price.


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## OptsyEagle

doctrine said:


> an analyst at TD securities just started coverage.


It's about time. I can't believe no one follows this company. Try to get a research report or even an earnings estimate on this one.

Nice to see that finally changing. Maybe we can start moving up to some respectable level of valuation. This thing was so undervalued for so long but it was like no one seem to ever notice it. I think that TD analyst put a $11.50 target price on it. Seems reasonable.


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## jamesbe

Wow that would be sweet, now if only I had more into it...


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## jamesbe

Chrysler sales up again
http://www.nytimes.com/2012/03/02/b...er-report-sales-gains-despite-gas-prices.html


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## OptsyEagle

Nice to see it blow past the $9 level.


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## riseofamillionaire

Congrats to all who got on this one  A great place to be in the middle of a recovery.


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## OptsyEagle

Well, this company has great earnings and a great dividend yield and if these guys are right they will have a great growth rate as well.

--------------------------------------
Over 30% of Canadian Auto dealers want to be out of the business or semi-retired in the next 12 months. Should bode well for cheap acquisitions for a company like AutoCanada with low debt and plenty of free cash flow.

http://www.pwc.com/en_CA/ca/automotive/publications/pwc-dealer-trendsetter-survey-2012-02-en.pdf


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## rusty23

up almost 7% today! nice call


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## lakota

5 % down today


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## doctrine

I am up 50% on my position on this company after this pullback.

I've taken a look at their financials. Their adjusted earnings in Q4 were $0.23/share. For the year, they were $0.89 a share. That puts them at a P/E of 10.5. They paid out $0.41 in dividends last year and will pay out $0.56 this year at the current dividend rate for a payout ratio of 63% assuming no earnings growth or decrease.

So overall, looks pretty good, and likely a dividend increase is coming since their policy was to target 70-80% payout. Definitely holding. 6% current yield.

I also have to say that not one share was issued in the last year. Gotta love a company that has zero dilution.


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## OptsyEagle

Awe inspiring results for AutoCanada.

https://pictures.dealer.com/autocanadatc/3d59cb380a0d028a013d725485fff72f.pdf

2011 Fourth Quarter Operating Results

• Revenue increased 20.4% or $40.4 million 
• Gross profit increased by 18.2% or $6.5 million 
• Same store revenue increased by 24.8% 
• Same store gross profit increased by 20.6% 
• EBITDA was $7.5 million vs. $3.5 million in Q4 of 2010, a 117.6% increase 
• The number of new vehicles retailed increased by 13.2% 
• The number of used vehicles retailed increased by 12.0% 
• Repair orders completed for the quarter were down 1.5% 
• Same store repair orders completed for the quarter were up 4.2% 

-------------------------------

ESP of $0.23 per share and adjusted free cash flow per share of $0.37 in the 4th quarter.
Dividend yield is currently 5.8% with a free cash flow payout ratio of only 38%.
They raised their dividend in each of the last 4 quarters and Q1 is almost over. Q2 is usually their busiest and most profitable and it starts next week.
The CEO owns 25% of the stock and as the last poster indicated he ensured that not one single share was issued last year. He seems quite driven and intent on rewarding himself and his partners. 
I can't see this company not providing a lot more good news in the future.


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## gibor365

OptsyEagle said:


> Awe inspiring results for AutoCanada.
> 
> I can't see this company not providing a lot more good news in the future.


Are you buying more?


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## OptsyEagle

gibor said:


> Are you buying more?


Due to the strong upward momentum of this stock, my position has now grown to become a big boatload of shares in the portfolio, so unfortuneately prudent diversification tells me that I cannot buy any more. Wish I could.


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## PMREdmonton

By implication that means you still consider them undervalued?

I have a bunch that I bought when it was around $6-7 but haven't bought any in awhile.

I would consider buying on a dip when I need a new Cdn dividend payer. 

The nature of their business suggests that growth should not be a major consideration in their valuation - how long can a car dealership continue to expand sales in a given region? I would think that growth will mostly have to come through acquisition and they did buy a couple of dealerships in the fall so I do see that as an irregular mode of expansion.

Is there any data on how much of their money comes from new sales, used sales and repairs/upgrades?


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## doctrine

Yeah, it's all in their annual report.

Revenue
2011 2010

New vehicles 640,721 514,676
Used vehicles 206,030 202,552
Finance and insurance 51,845 43,721
Parts, service and collision repair 110,262 108,558
1,008,858 869,507

I am considering buying more but the 50% growth I've already seen has pretty much added another half position to me.. worth 5.2% of my portfolio, could add another 1/3rd at most I suppose.


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## OptsyEagle

AutoCanada's sales in the 1st quarter should be great. About 1/2 their dealerships are Chrysler. 

-----------------------------------------------

Chrysler tops Canada auto sales in first quarter
Tue Apr 3, 2012 2:44pm EDT

(Reuters) - Chrysler (FIA.MI: Quote) said on Tuesday it sold more vehicles in Canada in the first quarter of 2012 than any of its competitors with demand especially strong for its line-up of passenger cars.
Sales at Chrysler, which makes Ram pick-up trucks as well as Jeep, Dodge and Fiat models, rose 8 percent in March to 22,703, the company said. Chrysler said its sales were up 12 percent at 55,823 in the first quarter from the first three months of 2011.

Chrysler was No. 3 in sales in Canada last year behind Ford Canada (F.N: Quote) and General Motors (GM.N: Quote).

Sales of Chrysler trucks, up 1.6 percent at 18,361 last month, still dwarfed sales passenger cars at 4,342. But car sales were up 50 percent from March 2011.

Strong Canadian vehicle sales this year have taken the market by surprise as the overall economy remains sluggish. High fuel prices have helped to stimulate demand for smaller fuel-efficient passenger cars.

Across the border, U.S. auto sales continued a robust pace in March, boosted by consumers with more confidence in a recovering U.S. economy who want to buy fuel-efficient cars and trucks in the face of rising gasoline prices.

(This version of the story corrects the first paragraph to show Chrysler was top seller in the first quarter, but not in March)

(Reporting By Nicole Mordant in Vancouver; Editing by Peter Galloway)

© Thomson Reuters 2012 All rights reserved.

http://ca.reuters.com/article/businessNews/idCABRE8320NR20120403


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## Ethan

I checked this stock out tonight after hearing somebody pumping this stock on BNN. How did I miss this thread? I think this stock is a great buy at $10.70, I can't believe I could have bought for Less than $5 six months ago. Putting this one on my watch list.


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## ddkay

Were the pumping it on April 3? The volume shows it - the most net buying activity in 2 years


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## Ethan

ddkay said:


> Were the pumping it on April 3? The volume shows it - the most net buying activity in 2 years


It was on "Headline" late last night. I think it was just a replay of what was aired earlier that day, which was April 4.


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## CanadianCapitalist

Next time OptsyEagle makes a stock pick, I might make a small wager. The guy has a midas touch


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## OptsyEagle

CanadianCapitalist said:


> Next time OptsyEagle makes a stock pick, I might make a small wager. The guy has a midas touch


Make it a small wager. I can show you lots of stocks that probably made as much sense to me to buy as this one did, that didn't turn out quite as well. I take my luck when I can get it. It seems to be delved out in such small quantities to stock investors.


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## OptsyEagle

I should add that this article in the globe yesterday is also very interesting.

http://www.theglobeandmail.com/glob...blicly-traded-car-dealerships/article2392277/

http://www.pwc.com/en_CA/ca/automotive/publications/pwc-dealer-trendsetter-survey-2012-02-en.pdf

I think I alluded to this a while back, but in essence it tells investors that AutoCanada's opportunities to expand their number of dealerships is looking a lot better then it did before. Keep in mind that AutoCanada has plenty of free cash flow after it pays it's dividends to fund expansion and it has very little debt on its balance sheet.


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## doctrine

There are lots of companies with P/E ratios of 5. Essentially it has been re-priced to a P/E of 10 and could go to 15 at this rate. Sometimes you have to wait years in order for a smallcap to realize P/E expansion. The timing here of course has been fantastic. And the fact that it is a smallcap means that small investors like us are making a lot of money, but no billion dollar fund would be able to get in on the action without massively driving up the price and reducing their returns.


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## jamesbe

I only wish I put more on this at $7!


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## PMREdmonton

The one thing in that article that I found interesting was the notion that the auto companies would not sell dealerships nor let private companies sell auto dealerships to publically held companies. I'm not sure what they have against publically held companies other than the financial results would be in the public domain. This would be a major barrier to expansion for the company as they can't buy dealerships from many manufacturers. I really don't like the idea of my success in the investment being highly levered to Chrysler vehicles. That is why I have been reluctant to increase my holdings thus far beyond the 400 shares I bought around 7.

The other thing to think about is they have largely benefited from the mini-boom in auto sales in Alberta with the recent oil fields boom. There may be a correction coming there in the next while. These company's shares have been taking a pounding lately as they are not reaping the benefits of the high oil prices. If oil goes down to 80 there will likely be a major pause in oil field work and a crash in ACQ's sales.

They really need to diversify their offerings so I hope they manage to convince more Canadian HQs of auto companies to sell dealerships to them.


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## OptsyEagle

I am not sure why the automakers prefer to have mom & pop type dealers instead of publicly traded companies. Perhaps, the automakers do not want too much sales control in any one company.

In any event, I believe this is just the behaviour of GM and Toyota. Chrysler, Voltswagen, Kia and Hyundia do not have similar attitudes and hopefully whatever attitude the others have, there may be room for change. In the mean time, sales of Kia and Hyundia have been booming and Voltswagens always seem to sell their quota each quarter.

As for the benefit of a mini-boom causing the outstanding results. While there may be some truth to it, one should recognize that auto sales have been booming equally across the entire country as well as in the United States.


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## OptsyEagle

http://www.edmontonjournal.com/busi...th+fuels+investor+interest/6457017/story.html


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## OptsyEagle

More growth in dealerships.

http://finance.yahoo.com/news/autocanada-inc-announces-brand-successful-214500061.html


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## OptsyEagle

Finally getting some analyst coverage.

http://www.cnbc.com/id/47141900


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## OptsyEagle

Why don't they just say AutoCanada's sales pulled into the fast lane. Chyrsler, Hyundai, and VW are all the dealerships that AutoCanada owns. 1st quarter numbers should be stellar.

http://ca.finance.yahoo.com/news/chrysler-hyundai-vw-pull-auto-122549365.html


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## rusty23

Optsy, do you see at this level if it's still a good time to buy or are we nearly full valuation?


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## OptsyEagle

rusty23 said:


> Optsy, do you see at this level if it's still a good time to buy or are we nearly full valuation?


As always, tough to say. It certainly is not the "no-brainer" it was 6 months ago, but on a PE basis and dividend yield basis, it still comes out looking very cheap. I like to look at a stock as a new buyer might approach it. Compared to other companies out there and looking at its current metrics, I don't think the $13 range is out of the question. There are a lot of dividend stock investors out there looking for new investments just like AutoCanada. This one has never been toughted very much by the analyst community so I suspect a large amount of new buyers will continuously stumble onto the story. 

The 1st quarter numbers will be interesting to see and one should remember that the second quarter is traditionally AutoCanada's best quarter.

All that being said, I can't buy anymore because the position has grown to become a very dominant part of my portfolio, but at the same time, I have a hard time convincing myself to sell any, since I can't seem to find a home for the proceeds in any new stock that has better value fundamentals.


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## OptsyEagle

And here's another.

http://www.cnbc.com/id/47241838



> Canaccord genuity starts Autocanada with buy rating, C$13.50 target price


I guess this must be the reason for today's big jump or maybe someone has an inside glimpse at the 1st quarter earnings release. I can see it not being stellar.


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## rusty23

http://life.nationalpost.com/2012/05/01/chrysler-sales-up-20-in-april/

chrysler up 20% in april and they will not have the usual 2 week summer shut down due to increased demand for Jeep Grand Cheeoke. 

finally decided to put a bid this morning and it was not filled miss out on 8% gain :stupid:


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## OptsyEagle

Yes. It seems everyone likes Chrysler again. Not sure why, but I'll take it. Those new Fiats are kind of unique and seem to be selling quite well also.


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## rusty23

jeep and dodge trucks have always done well, their cars are still terrible but i guess they are selling. I guess i should of picked up on this earlier since they re-started the Viper, a halo car which companies traditionally lose money on.


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## OptsyEagle

OptsyEagle said:


> I am not sure why the automakers prefer to have mom & pop type dealers instead of publicly traded companies. Perhaps, the automakers do not want too much sales control in any one company.


http://www.theglobeandmail.com/globe-investor/news-sources/?date=20120501&archive=cnw&slug=C3093

Well I suppose I was right about why GM was resistant to allow AutoCanada new dealerships. The way they have structured this deal and future ones seems to look like they don't want too much control concentrated in their dealerships. Obviously AutoCanada's money and necessity trumped that. This structure will not change the control issue very much. 

There was also another article that talked about the huge number of dealerships that may come available for purchase by a company like AutoCanada with big pockets.




> Over 30% of Canadian Auto dealers want to be out of the business or semi-retired in the next 12 months.


http://www.pwc.com/en_CA/ca/automotive/publications/pwc-dealer-trendsetter-survey-2012-02-en.pdf


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## jamesbe

Woot! Up 70% since I got in, if only I had put in more! LOL


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## doctrine

Up 80% for me. I predict this will be an official double within a few months  No way I'm selling.


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## jamesbe

The thing is though... if you don't sell. Then really it doesn't matter if it ever gained now does it?


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## doctrine

It does, because I'm getting close to a 10% dividend on my purchase, a dividend which will likely go up and drive further increases in share price. I won't really consider selling unless it goes above a 20 P/E, and thats still a long way off (currently closer to 12).


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## doctrine

Big article in Report on Business after the close. 

http://www.theglobeandmail.com/glob...canadian-auto-industry-policy/article2420643/


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## doctrine

Dividend increase up 7.1%with Q1 results to $0.15 a quarter from $0.14 a quarter. 

https://pictures.dealer.com/autocanadatc/2f8cbebd0a0d028a012b29eda27cca3d.pdf


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## OptsyEagle

Not too bad of results. Nice to see the dividend increased again. Thought the quarter would have been a tad better, profit and cash flow wise, but Q1 is usually their weakest.

Since my cost base was down in the $3.75 range, I sold half my position today. The easy money is over but compared to most other stocks, ACQ still sports some good fundamental valuation.


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## rusty23

great job Optsy

think the reason for the recent pull back?

http://www.theglobeandmail.com/glob... RSS/Atom&utm_source=Home&utm_content=2427923


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## doctrine

Recent pullback? Even at the close today, it is up over 25% in two weeks.


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## lakota

what is going on with this stock ,down to 11.35 so far


----------



## jamesbe

It went up like 50% in 2 weeks. Just leveling out now.


----------



## iBroke

*AutoCanada*

Been lurking here for the last few months so I thought I would use your query to reply since I was questioning the drop myself too. Perhaps this recent article in Globe and Mail might of scared a few investors away:

Why AutoCanada is a (cautious) buy
http://www.theglobeandmail.com/globe-investor/investment-ideas/features/vox/why-autocanada-is-a-cautious-buy/article2432488/

The annual report makes reference to Canada One Auto Group renting the properties, but some investors might not find the idea of AutoCanada executives owning competing dealerships very appealing.


----------



## OptsyEagle

I have to admit that I am not completely comfortable with this arrangement as well. It's not that I think management is purposely going to self-deal in these transactions, but I know human behavior and bias very well. Independant directors who are nominated by CEOs, cease to become independant and cannot be relied upon to protect the shareholder. If you were setting up deals in this environment, how do you think the deals would be stuctured for all the parties involved?

I have always liked the idea that the CEO was the largest shareholder and so far that has served everyone very well. I think I would prefer to see another dividend instead of putting that money into another arrangement like the GM one. That arrangement may be necessary for growth, but here, I am not sure what is the bigger problem, growth or conflict.

Anyway, I have fully liquidated this position, mainly because I needed money for other opportunities. Good luck to all.


----------



## riseofamillionaire

My best guess is it probably consolidates for a good part of this year. Over time, I think there's another leg to the rally if auto sales keep improving.


----------



## jamesbe

Autosales were great in June so this is up again. I'm officially over 100% gain on this one!!! I wish I put more into it!


----------



## AnimeEd

Q2 earnings today
any minute now.....


----------



## AnimeEd

http://www.marketwatch.com/story/au...in-its-quarterly-dividend-2012-08-09-18183280


----------



## doctrine

Very nice - as far as I can tell, 6 dividend increases in the last 6 quarters, now to $0.16. This stock has been hitting all time highs and I am continuing to hold and up +120% YTD.

With net earnings of 33.8 cents, they only paid out at 47% this quarter, although I believe this is normally their best quarter, the payout ratio is fantastic. And still hovering around a P/E of 10-12 with the increase in earnings. If I wasn't at a 5-6% weighting already, I'd buy more for sure.


----------



## liquidfinance

doctrine said:


> Very nice - as far as I can tell, 6 dividend increases in the last 6 quarters, now to $0.16. This stock has been hitting all time highs and I am continuing to hold and up +120% YTD.
> 
> With net earnings of 33.8 cents, they only paid out at 47% this quarter, although I believe this is normally their best quarter, the payout ratio is fantastic. And still hovering around a P/E of 10-12 with the increase in earnings. If I wasn't at a 5-6% weighting already, I'd buy more for sure.



I read the financials when it was first posted on this form and have watched and waited and regretted not getting in since. It still seems to be a goods story but i'm not going try and chase it now.


----------



## doctrine

As with everything, there is a price where stocks are a great buy, a good buy, and a poor buy. ACQ is definitely a good buy at this price, but yes it was an outstanding buy when the stock was $5-6 with a P/E of 6-7


----------



## Ethan

ACQ posts record earnings and increases the dividend, and the stock promptly falls 2%. I love when the market creates buying opportunities like this.


----------



## Ethan

Q3 results just announced. Highest ever quarterly earnings and yet another dividend increase.

http://www.hawaiinewsnow.com/story/...nounces-an-increase-in-its-quarterly-dividend


----------



## jamesbe

This is my best stock by far. Too bad I didn't gamble more on it. I put in 2 grand at $6 I sold half of them at $14 and moved that money into BCE which has also been doing well for me.

I'm not sure I would buy at $14 it's kind of high now but I'd buy again at $10


----------



## ddkay

I made a bad call in this, should have ignored the shenanigans in Europe


----------



## jamesbe

Well I lied. I figured I would gamble last night. Put in a buy order with a limit of 14.10. Picked a bunch up at $14.06 and going to sell now, a quick 3% gain for weekend spending money lol


----------



## marina628

I got in at $5.90 last year and bought some more at $7.20 in February ,going to sell half and take some profits in January.Thanks again Jungle


----------



## doctrine

That's the 7th quarterly dividend increase in a row. I'm still holding the 820 shares I bought at $6.30 back in January. It's hit another 52 week high in the last 10 days and nearly touched it again. Great company.


----------



## BullAllTheWay

Still holding the shares I bought at an average price just under $2. Some will say I am a bit greedy. Well, I will answer that there is no reason to sell now. I don't know where the stock will be in one month or next year, but I know that the company has never been in better shape. And with the prospects of more acquisitions to come, I believe that the future looks even better.


----------



## Ethan

Bought another 200 shares with part of my 2013 TFSA contribution. Very excited for the future of this company. Lots of room to grow the dividend, how many consecutive quarters will they be able to raise their dividend?


----------



## marina628

I sold all of my stock yesterday ,average price was $6.96 and sold for $15.75.I had 2000 shares in my tfsa and 1000 shares in non registered account.Thanks once again Jungle for putting this on my radar


----------



## doctrine

They've been hot, an all time high on 16.00 on Wednesday. I don't know how long the growth will continue, but the dividend payout ratio is still only about 50% based on 12 month trailing adj. earnings.


----------



## BullAllTheWay

Announced yesterday the acquisition of a Volkswagen dealership in Grande Prairie. Great news for shareholders. Not only do we grow the business, but management is also diversifying from its Chrysler base.


----------



## doctrine

https://pictures.dealer.com/autocanadatc/e01032050a0d028a01d1695e393c597a.pdf

ACQ announced a dividend increase from 17 cents a share to 18 cents a share. The new yield is 4.1% based on closing price today. It's the eighth consecutive quarterly dividend increase. It's a 28% increase on an annual basis. Pretty impressive run - there's not many companies that raise dividends 8 years in a row. Perhaps this is my favorite dividend growth company  Up +175% on my purchase just over a year ago, not counting dividends.


----------



## Ethan

Great news re the dividend increase. I see a great future for this stock. More dealerships are coming up for sale, the car companies are starting to allow public ownership in Canada, and ACQ is generating sufficient free cash flow to keep up their acquisition spree.


----------



## BullAllTheWay

The yield on my cost basis is 36.5%. Very glad, indeed, I backed up the truck for ACQ in the spring of 2009.


----------



## doctrine

More dealerships.

https://pictures.dealer.com/autocanadatc/b1b0d3780a0d028a01fbfbf998a58e9d.pdf

They also had record Q4 and annual (2012) results. What's not to like? This is officially a triple for me now, not including dividends.


----------



## Lucida

Stocks at 19.22 right now, do you guys think it's going to continue to go up or not? Seems to me like it might go down for a bit and then go back up for awhile, thoughts anyone?


----------



## BullAllTheWay

As long as the company continues to grow, the stock will continue to go up, although ups and downs are always in the cards.
I have been holding for a long time and don't see the shadow of a reason to sell. In fact, I believe that the story has never been better than now.


----------



## jamesbe

Up over 4% today!

My initial purchase is now up 200% I jumped in with a bunch more late last year and those are still up 45%!


----------



## doctrine

They appear to be transitioning to growth quite quickly. They've added 3 dealerships this year plus 80% of a GM one, which is 15% growth already, and they're estimating 4-5 more dealerships this year. They are such a small % of the overall dealership market in Canada, yet are the only publicly traded one in the space.


----------



## Ethan

ACQ up 5.5% today on ~3.5x average trading volumes. I can't find any news releases, does anyone know what's going on?


----------



## BullAllTheWay

No. But it doesn't really matter. This is a good stock and a very well managed company. Nobody knows if it will hold this price for long, but I believe that it will trade a lot higher in just a few years. There is a lot of upside in AutoCanada.


----------



## jamesbe

+242.30%	chaching


----------



## BullAllTheWay

As far as I am concerned it's more like 1102.74%. :tongue-new:


----------



## gimme_divies

Does that include dividends? LOL Way to go, this is my first 3-bagger and can't imagine how good it must feel to be up over 1000%.


----------



## blin10

man that's insane... good job to whoever got in early


----------



## jamesbe

gimme_divies said:


> Does that include dividends? LOL Way to go, this is my first 3-bagger and can't imagine how good it must feel to be up over 1000%.


Ha I haven't even counted dividends. Crazy!


----------



## BullAllTheWay

gimme_divies said:


> Does that include dividends? LOL Way to go, this is my first 3-bagger and can't imagine how good it must feel to be up over 1000%.


No, it does not include dividends.


----------



## doctrine

ACQ is essentially a 4 bagger for me now. It's a little pricer now at about 19x trailing earnings but no reason to sell at this time.


----------



## Lucida

Debating on whether I should buy some shares or not, they just keep expanding, don't see any signs of them slowing down. :/


----------



## BullAllTheWay

I am comfortable holding my shares. It doesn't mean that the stock can't go down though.


----------



## doctrine

Blowout quarter, $0.345 a share in earnings, up 66%, and 10th consecutive quarterly dividend increase to $0.19 a share from $0.18 a share. I've never seen a company raise its dividend every quarter for two and a half years.

https://pictures.dealer.com/autocanadatc/7c36108b0a0d028a010241ae9b1fbe9c.pdf


----------



## jamesbe

wholly crap on a cracker!
AutoCanada Inc.	ACQ	26.20*	+2.79 (11.92%)	180.00	1,247.87	4,680.00	+3,432.13	+275.04%	+466.20	201.91%


----------



## BullAllTheWay

Quite impressive indeed. I am flabbergasted.


----------



## Ethan

AutoCanada is trying to single-handedly fund my retirement!

It's up 13% today, 73% YTD, and 473% since conversion to a corporation at the start of 2010.


----------



## CanadianCapitalist

I guess many of you owe OptsyEagle a huge thank you. Or maybe even a couple of beers


----------



## blin10

doctrine, based on your 820 shares you up like $17g's... nice home run


----------



## OptsyEagle

Beer sounds good. 

It definitely was undervalued when I a saw it in the $3's. Unfortuneately, when you buy a stock in the $3 range it always seems to be much more fully valued when it gets into the $13 range, which is where I got off this bus. I didn't really like the structure with the purchase of the GM dealerships, where the CEO personally owns a majority stake, etc., but I guess the investment community couldn't care less.

I am glad many others held on.


----------



## dave2012

ACQ is one of my larger holdings. Locked in some profits today but will buy some back again on a dip. My goal is to pay for our newly purchased truck with the gains from this stock. As of today I've paid 42% of the truck off with ACQ gains and dividends since September! :love-struck:


----------



## Lucida

That terrible feeling when you're like "this stock's at its prime, it wont go up anymore" and then you see it went up a crapload.

Wish I got in when I wanted too. I'm praying it goes back down to 23 or so, I want it


----------



## Lucida

Up another 6% today


----------



## Ethan

What does the board think this stock is worth? I find it difficult to value a stock with skyrocketing earnings, growth fuelled by acquisitions driven by free cash flow (as opposed to equity or debt), and a dividend that increases every quarter. Any metric I apply doesn't work because the fundamentals are constantly changing; each quarter ACQ adds 1-2 more dealerships, sets a new record for same quarter profit and raises the dividend. I have 400 shares purchased between $11.50 and $15.00, I only wish I had bought more. If I didn't have any shares, I'd probably buy up to a PE of 15, which equates to a price of ~$31.


----------



## GoldStone

You are a trained accountant. If you can't value it, what hope the rest of us have? LOL.

They are issuing 1.6M shares (8% of the current float) to finance a new large acquisition and to reduce debt. How dilutive is that? I guess it's hard to tell without looking at the books of the new dealership.


----------



## doctrine

Based on the last quarter, assuming 20% EPS growth and a P/E of 20, I get a price of about $33. OTOH, 0% EPS growth and a P/E of 15 gives a price of $20.70. And with a P/E of 25 for a real growth stock, it's $41.40. I'm not likely to sell because of the capital gains tax and I don't think this stock would see $10 again even in a recession, but I would say buy at $21/below, sell $41 and above, hold or small purchases otherwise. This estimate is probably only good until the next quarter. 

Given the stock was issued at $25 and they closed at $27.50, there will almost certainly be a pullback tomorrow. Although 8% dilutive, the one dealership adds 10% to revenues, making it net accretive; no indication they did use the entire $40M though.


----------



## jamesbe

I'm in Calgary this week so I went to some dealerships to see what I'm investing in.

There is a lot of money out here in cars!


----------



## nakedput

jamesbe said:


> I'm in Calgary this week so I went to some dealerships to see what I'm investing in.
> 
> There is a lot of money out here in cars!


How many jacked up Dodge Ram or F 150 trucks did you see


----------



## jamesbe

Surprisingly not many. I saw a ton in Texas but Calgary is more regular loaded trucks and high end luxury vehicles.


----------



## Ethan

doctrine said:


> Based on the last quarter


When looking at previous quarters, remember the cyclicality of car sales. AutoCanada's strongest quarters are q2 and q3. Q1 and q4 are typically weak. You could look at the trailing 4 quarter earnings, but those will also be distorted because they have added multiple dealerships since q2 2012.

I just saw the announcement on the equity issuance, which adds a further wrinkle to the valuation. Although the move should be accretive to EPS, I don't like the idea of raising dividends while issuing equity. A company should issue dividends if it feels investors can get better returns with their cash elsewhere, typically a mature company with limited growth prospects. A company issues equity when it feels it has substantial growth prospects. A company issuing equity while raising the dividend is sending a mixed signal.

Regardless, I'm still bullish on the company.


----------



## Lucida

Was hoping the stock would stay around 26 or even go back down to 25 for a few days until my funds are transferred to my account, too late now, hopefully there's another dip soon.


----------



## dragenn

I wish l was in this stock long ago. I never thought this one would be such a huge win


----------



## Ethan

dragenn said:


> I wish l was in this stock long ago. I never thought this one would be such a huge win


It's not too late to get in


----------



## dragenn

Ethan said:


> It's not too late to get in


I need to do some research and figure out the potential of this stock. Anybody have any rough price targets / timelines. I avoid investing in a stock until ive done about a month or two of tracking and detective work


----------



## Synergy

dragenn said:


> I need to do some research and figure out the potential of this stock. Anybody have any rough price targets / timelines. I avoid investing in a stock until ive done about a month or two of tracking and detective work


According to Michael Smedley (BNN) on July 18, 2013 - "Forecasts make this a double from here, whether or not that will be, it is a splendid company".

I'm tempted to pull the trigger but somewhat concerned over the big run up year to date - up over 120%.


----------



## nakedput

Synergy said:


> According to Michael Smedley (BNN) on July 18, 2013 - "Forecasts make this a double from here, whether or not that will be, it is a splendid company".
> 
> I'm tempted to pull the trigger but somewhat concerned over the big run up year to date - up over 120%.


I took a serious look at it 20% ago and yet it has still continued its run. Being up this much year to date does still frighten me, however. And the fact that rates are destined to move up and up, weakening demand for auto's and the space as a whole.


----------



## doctrine

Autocanada was trading in the $26's for much of June, that might have been a good buying opportunity. It can be very volatile if you follow it closely, heck it opened the week at nearly $30, dropped to as low as $27.75 then finished the week close to $30 again. Doesn't matter much if your cost basis is $6.30 a share though


----------



## doctrine

Record revenue and earnings on their Q2 release.

https://pictures.dealer.com/autocanadatc/601c92280a0d02b700a4911d18dd43b4.pdf

-Revenue up 31%
-Net earnings up 61%
-Same store sales up 26%

On the dividends..

-Dividend increase from $0.19 to $0.20 a quarter, or 5.3%
-Tenth consecutive quarterly dividend increase
-Despite dividends up 25% year over year, 12 month trailing payout ratio has dropped to 50% vs 60%


----------



## jamesbe

wow so awesome


----------



## marina628

I sold all this stock for a fantastic profit but I just got in again a couple weeks ago with $5000 of the profits I took out.


----------



## liquidfinance

I look forward to the CMF members digging up another little gem like this one. Kicking myself for not getting into it. But I'm not going to try and catch it now. Maybe it can continue the growth but I will just continue to regret not buying in.


----------



## Ethan

ACQ - the gift that keeps on giving


----------



## jamesbe

I put $2k in this stock at $6 Then sold half when it doubled. I still have made over $5k on it!

I bought more at $14, glad I did!


----------



## jamesbe

Yup they raised dividend to 20 cents
http://www.prnewswire.com/news-rele...-the-tenth-consecutive-quarter-218911721.html


----------



## Lucida

Finally caved and bought the stock on Friday, up almost 3% already =)


----------



## blin10

It's one of those stocks, I missed it but ain't going to chase it... If markets tank this thing will sink fast, but congrats to people who got in early


----------



## doctrine

ACQ is the gift that keeps on giving. My shares are worth nearly $30k now (more than $30k with dividends). Trailing 12 month P/E ratio is 23, but earnings growth is supporting it. I think growth will trail off in another year but they definitely have a couple of good quarters ahead.


----------



## Lucida

blin10 said:


> It's one of those stocks, I missed it but ain't going to chase it... If markets tank this thing will sink fast, but congrats to people who got in early



I've read a few articles stating that car manufacturers (like Magna) have really increased productions because orders from Ford, Chrysler, etc are increasing, so it seems like the auto industry is doing fairly well atm, don't think I'll be selling soon, but I also won't be holding it for more than 3-6 months


----------



## blin10

Lucida said:


> I've read a few articles stating that car manufacturers (like Magna) have really increased productions because orders from Ford, Chrysler, etc are increasing, so it seems like the auto industry is doing fairly well atm, don't think I'll be selling soon, but I also won't be holding it for more than 3-6 months


yes that's what I'm talking about, economy doing good -> people buy cars -> auto companies do well... if (a big if) economy slows down those car company stocks will fall


----------



## Lucida

blin10 said:


> yes that's what I'm talking about, economy doing good -> people buy cars -> auto companies do well... if (a big if) economy slows down those car company stocks will fall


Yeah I know, I'm just saying that Car manufacturers are getting more orders so it seems that in the near future the auto industry will doing well


----------



## GoldStone

doctrine said:


> I think growth will trail off in another year


Can you explain why?

Car buying cycle may very well slow down, but that isn't the only factor that fuels ACQ growth. Dealership acquisitions is another driving force. IIRC, they want to acquire 6-7 dealerships a year. Many small mom & pop dealers are approaching retirement and are looking to sell.

Do you have any good reasons to believe that acquisitions will slow down?


----------



## GoldStone

By the way:

ACQ CEO will be on BNN tomorrow (Sep 17) at 8:15am.


----------



## doctrine

Oh, I don't think acquisitions will slow down. I think the massive 25%+ same stores sales growth will slow down in a year; clearly, Canadians won't be buying 25% more cars every year forever. I don't think the stock is priced like it has to, but its certainly priced to expect 10-20% revenue and earnings growth, which is entirely achievable. I will definitely watch that segment tomorrow (you can watch most clips on their website after the fact which is what I'll do).


----------



## jamesbe

Anyone have a link? Love this stock.

In some what related news Chrysler is to offer IPO soon.


----------



## doctrine

Try this -> http://watch.bnn.ca/#clip1005103


----------



## jamesbe

thank you!


----------



## Lucida

Any reason on the sudden drop today? Went up to a high of 37.30 and closed in the red :/


----------



## GoldStone

Hey, it's a small cap stock with a low trading volume. It can be 3% up or 3% down for no reason at all. Just regular market volatility.


----------



## jamesbe

Yup it constantly fluctuates. If you are looking for something stable look elsewhere, this thing is like a yo-yo


----------



## Lucida

Up almost 4% on no news wow


----------



## doctrine

They could be due for a pullback but auto sales are strong and they recently widened their credit line for more acquisitions. I am confident ACQ will be added to the TSX Composite within a year or two, they meet liquidity requirements and will soon be at the $1B threshold market cap.


----------



## doctrine

ACQ results: earnings up 61%, 5% dividend increase (11th consecutive quarter), $400M in sales in 3 months. Seems to be all pretty good - they hit an all time high today. $35M of net earnings in the last 12 months, compared to about ~$22M in the previous 12 months. I still think they might be added to the S&P Composite Index within a year, given their market cap and liquidity. 

http://www.prnewswire.com/news-rele...-raises-its-quarterly-dividend-231072531.html


----------



## Lucida

Killed earnings once again, stock is p ~3% today, should go up a few more % on monday aswell. The company is showing no signs of sales slowing down or anything


----------



## jamesbe

This stock could solely fund my retirement lol. Well I wish. I only put $2500 in but it's worth close to $10k now! OMG!

Imagine if I could hit a home run like that again.


----------



## Lucida

Sold this morning at 42.85 for a 16‰ gain (after commission)


----------



## doctrine

Pretty good 2013 for ACQ. Set a 52 week high today before closing at $45.89. I thought my 2012 return of 148% was something; I have my 2013 return calculated at 196% with four dividend increases totaling 23.5%. Love seeing my ACB of $6.30 on this stock. Definitely the most expensive stock I own with a 12 month trailing P/E of 26, but hard to argue with the earnings growth.


----------



## blin10

ya this thing is crazy...


----------



## GoldStone

It's not too late to join the club. They plan to buy 4 to 7 dealerships in the next 18 months... if they can find enough willing owners to sell. Every new dealership contributes to the earnings growth.

I'm obviously biased as a shareholder.


----------



## Synergy

GoldStone said:


> It's not too late to join the club. They plan to buy 4 to 7 dealerships in the next 18 months... if they can find enough willing owners to sell. Every new dealership contributes to the earnings growth.
> 
> I'm obviously biased as a shareholder.


Show me a little correction in price and I'll join the party! Seems like all the local auto dealers in my small town are building new or renovating their existing buildings. The auto industry must be doing okay now...


----------



## camfire

Good time to buy with this recent pullback?


----------



## jamesbe

6% dip today, anyone know why? That's a lot!


----------



## dave2012

No news lately actually. Good day to buy low! (I did)

A few comments on Bullboards... http://www.stockhouse.com/companies/bullboard/t.acq/autocanada-inc


----------



## GoldStone

Ditto. I added a few shares. Increased my existing position by 13.6363636363636363636363...%


----------



## explorer416

In at $41.00. Let's see where this goes...


----------



## jamesbe

Ouch, I bought some more of this at $45. Not a big deal as the majority I own I bought at $6 But it's $39 right now, now would be the time to get even more....


----------



## Butters

why is it so low, you guys still see growth in it


----------



## dave2012

Definately the growth is there. Car sales in Canada are doing well and they have been buying new dealerships.
Just low volume, no recent news, impatient investors. Some great opportunities to get in low, mind it could go lower before it takes off again.


----------



## the-royal-mail

Very interesting. Anyone know why 2013 was such a banner year for this stock? Now at $38.66, down from it's Jan 16 high over $45. Seems to be on a long, slow downward trend.


----------



## none

I though unemployment was going up in Canada? Wouldn't that reduce car sales, hence the decline in this stock?


----------



## GoldStone

dave2012 said:


> impatient investors


^ This. One week decline and everyone starts to panic.



the-royal-mail said:


> Seems to be on a long, slow downward trend.


Long? You must be kidding.


----------



## the-royal-mail

^ Also, if you listen to the rhetoric of the bicycling and anti-oil sands and pro-downtown crowds, "the age of the automobile is over".

It is funny how just reading a couple of pages and stats in this thread debunks all of the rhetoric they use to push for addition of bicycle lanes, reducing parking and taking away lanes from cars. They're selling more cars than ever today!


----------



## dave2012

Lots of pent up demand after people drove cars into the ground after the recession. 2014 should be another decent year.

http://www.cbc.ca/news/business/2013-auto-sales-up-4-in-canada-8-in-u-s-1.2483065

This will be a great opportunity to buy ACQ well off its high and ride the next wave up.


----------



## Ethan

the-royal-mail said:


> Very interesting. Anyone know why 2013 was such a banner year for this stock?


Net income for the first 3 quarters of 2013 is up 62.3% over 2012, fueled by increased volumes and acquisitions. Management has indicated they are in negotiations to buy several more dealerships in 2014, investors are now willing to pay a higher multiple of earnings for the shares due to the perceived growth from these future acquisitions.



> Now at $38.66, down from it's Jan 16 high over $45. Seems to be on a long, slow downward trend.


What led you to this conclusion?


----------



## the-royal-mail

Sorry for my poor wording. I was looking at graphs when I wrote that last comment. No need to pick apart my posts. I was referring to the period from Jan 16 to present. If you graph those days you can see what lead me to that impression. If you then do a 5-year graph you can see how the price for past 12 months has been on a peak and has been coming down since Jan. 16.


----------



## Ethan

AutoCanada has made me reflect on my investment strategy since it went above $30 in August. As a business, AutoCanada is my favourite holding across all my portfolios. Their net income growth is staggering, most of which is due to acquisitions. With numerous car dealerships expected to be available for sale over the next decade, there is no reason to think this growth story cannot continue. The Company is generating over $10 million of free-cash flow/year, meaning they do not need to take on signficant debt or equity to fund these acquisitions. Add in the dividend increases of ~5%/quarter and the Company is a cash cow for most investors.

The issue I have is the valuation. If this were a private company, I would gladly collect the dividends. Since the Company is public, I can easily sell my shares to someone who is willing to pay more than what I consider the shares to be worth. The market value of ACQ is now 23 times earnings, pushing the dividend yield down to 2.1%. The question I had was whether I should sell and redeploy the funds into companies with 4-5% dividend yields and 10-15 PE ratios like the banks, telco's and POT. I am typically a buy and hold investor so this kind of move is not something I usually do. I've also never had a stock double its earnings in 2 years while doubling the valuation of those earnings (ie quadrupling the share price).

I sold 1/4 of my ACQ holdings on October 8 @ $39.45 and put the funds into POT. Since ACQ has been flat ever since while POT has risen 10% perhaps I should have sold more. I still think net earnings will continue to rise at ACQ much faster than the overall TSX, I am just not sure how the market will value their earnings in the future.


----------



## doctrine

I feel ACQ has fallen because momentum players haven't seen the normal stream of acquisitions - there haven't been any in 7 months. With no news drivers, they get disinterested and/or satisfied with profits and leave. When the stock starts to fall, then other momentum investors jump out. 

On its fundamentals, I like ACQ at a P/E of 20 or below (where it is now) and am slightly uncomfortable above 25, which it almost reached when it hit $46. I believe 20% earnings growth is reasonable so a P/E of 20 should be okay. I also think 20% dividend growth this year is reasonable. Acquisitions from 12-18 months ago are still being incorporated into earnings and operations. So, still holding and collecting dividends...


----------



## Synergy

For all the ACQ shareholders, just wondering what type of exit strategy you may have. Meaning, how far would you let the share price drop before you decided to take profits (theoretical stop loss). Looks like it down about 11% from its highs in December.


----------



## marina628

I got out a couple months ago and took my profits as I was not comfortable holding it much longer.


----------



## GoldStone

I'm sitting on a large cap gain in the taxable account. I have no plans to sell. I want to own a share of this business and collect dividends.

Mr. Market is a bipolar maniac. One week it's happy and it offers you $46. Next week it's depressed and it offers you $39. The fundamentals of the business didn't change.


----------



## jamesbe

Yup holding for awhile.


----------



## Synergy

down another 6% this morning, anyone adding to a position or taking some profits? Personally I'd be more comfortable closer to the 200MA - around $35.


----------



## Ethan

ACQ is down 17.65% over the last 9 trading sessions despite no news related to the company. It will be interesting to see what happens when ACQ releases their 2013 annual report in March. Their YOY profits should increase dramatically, considering the following dealerships were added to their portfolio during 2013:

Grande Prairie Volkswagen - January 4, 2013
St James Audi & Volkswagen - April 1, 2013
Courtesy Chrysler (Calgary) - July 1, 2013
Eastern Chrysler (Winnipeg) - September 9, 2013
Peter Baljet Chevrolet Buick GMC (Duncan, BC) - March 1, 2013

Over the first 3 months of 2013, net comprehensive income was already up $11.0 million, or 62%. Q4 2013 income was $6.6 million, assuming the same growth rate as the first 3 quarters, we can expect Q4 2013 income of $10.7 million, and annual 2013 net comprehensive income of $39.3 million. This would put the trailing 4 quarter PE ratio for today's share price at 20.7. If the share price stays flat, the PE ratio should continue to come down as ACQ continues to pickup income from the above 5 purchases that was not available in the 2013 quarters (ie Eastern Chrysler only contributed income in Q4 and a bit of Q3 in 2013, but not Q2 or Q1). This is also assuming no growth in same store sales or any acquisitions, which I don't think will be the case given ACQ management has indicated they plan on buying 4-7 more dealerships in 2014.

Given the growth potential for ACQ through acquisitions, I'm comfortable holding at a PE of 20, which is roughly where I think they will be after they report 2013 earnings in March.


----------



## Kaitlyn

Really want to get in on this stock, and liking the dip (even though I missed getting in during the 20s! ugh!), but now I wonder if it still has further to drop...


----------



## Synergy

Kaitlyn said:


> Really want to get in on this stock, and liking the dip (even though I missed getting in during the 20s! ugh!), but now I wonder if it still has further to drop...


Picked up a few shares yesterday at $37.40 for my TFSA. Growth looks good, share price should eventually go higher.


----------



## Ethan

Down 5% yesterday on no news, up 4% today on no news, this volatility is getting ridiculous.


----------



## lakota

I am done with volatility...


----------



## Synergy

lakota said:


> I am done with volatility...


Volatility can be frustrating and scary, but it can also be viewed as a buying opportunity. The fundamentals will prevail in the end. Does anyone know when Q4 will be released?


----------



## Ethan

Synergy said:


> Volatility can be frustrating and scary, but it can also be viewed as a buying opportunity. The fundamentals will prevail in the end. Does anyone know when Q4 will be released?


Last year ACQ announced a dividend increase on February 15, and their annual report on March 26. I would expect similar dates this year.


----------



## jamesbe

Morningstar report
http://www.morningstar.com/cover/videocenter.aspx?id=630771


----------



## marina628

I may have another kick at the cat and get back in.


----------



## humble_pie

it's a can
not to kick poor kitty


----------



## marina628

HP Blame my software who does my typing


----------



## marina628

BTW I own a 4 year old Calico cat she brings her mouse into our bed every morning like clock work at 4am and wants to play lol,sadly the cat runs the house.


----------



## Synergy

ACQ - Announces its Twelfth Consecutive Quarterly Dividend Increase.

http://www.newswire.ca/en/story/130...elfth-consecutive-quarterly-dividend-increase

Nice little pop in the share price today.


----------



## GoldStone

Twelfth Consecutive must be some kind of record.


----------



## Synergy

Nice pop in the stock price this morning.

"AutoCanada Inc. Announces Stock and Cash Deal for Investment in a Group of Two General Motors Dealerships".

http://www.newswire.ca/en/story/132...-in-a-group-of-two-general-motors-dealerships


----------



## doctrine

Last month, they also won the right to open a new Volkswagon dealership in Edmonton. It's being built from scratch, expected to start operations in Q1 2016.

http://www.newswire.ca/en/story/1310055/autocanada-inc-announces-the-award-of-volkswagen-open-point


----------



## Ethan

Synergy said:


> Nice pop in the stock price this morning.
> 
> "AutoCanada Inc. Announces Stock and Cash Deal for Investment in a Group of Two General Motors Dealerships".
> 
> http://www.newswire.ca/en/story/132...-in-a-group-of-two-general-motors-dealerships


It's about time they moved into my province. My wife will be looking at upgrading her car sometime in the next year, it's nice to have the option to buy from a company I have shares in.


----------



## BullAllTheWay

You touch a good point. ACQ has no dealerships in the Eastern provinces. Imagine all that growth ahead...


----------



## the-royal-mail

Thanks doctrine for the link. You must have made a lot of money on this one. $45.71 right now. 

Does anyone have an understanding of the need for this type of business? Maybe I don't understand how this industry works but I thought the dealerships were opened up by the companies themselves. Maybe not. Reading the company info on their website they seem to be some sort of a middleman or dealerships broker? Anyone (jamesbe?) with a bit of industry knowledge who can fill me in on this business model?


----------



## RBull

BullAllTheWay said:


> You touch a good point. ACQ has no dealerships in the Eastern provinces. Imagine all that growth ahead...


I haven't checked this recently but think you are not exactly accurate. At least they used to own 2 Chrysler dealerships in Atlantic Canada- 1 in Dartmouth, 1 in Moncton from years ago.

Checked and they still do own these as well as 3 more in Ontario.


----------



## RBull

the-royal-mail said:


> Thanks doctrine for the link. You must have made a lot of money on this one. $45.71 right now.
> 
> Does anyone have an understanding of the need for this type of business? Maybe I don't understand how this industry works but I thought the dealerships were opened up by the companies themselves. Maybe not. Reading the company info on their website they seem to be some sort of a middleman or dealerships broker? Anyone (jamesbe?) with a bit of industry knowledge who can fill me in on this business model?


Car dealers are not normally opened by the manufacturers themselves. They are franchises with various rules etc owners need to operate by.

I do not own this company but my understanding is they are basically a holding company with numerous dealerships across different regions with different brands, that started with mainly Chrysler. They get strength from scale in purchasing power, system efficiencies and industry/personnel experience across their network vs. typical one off mom and pop / family dealers. I know the GM at my city dealer and he is a good operator.


----------



## jamesbe

RBull basically has it.

The big thing in this industry is that most of the older Big 3 dealership (Chryco, GM / Ford) were owned by people and their families since the dawn of the automobile. Every dealer is independently owned and operated, they do not answer to the manufacturers except that if they peeve them off then they may get less supply etc. Of course they have rules and such to follow.

Anyways, a lot of those dealerships are owned by guys in their 80's that no longer want to be in business and their families just want to cash out and retire. In comes ACQ to buy them up and soak up that business and create efficiencies. 

I got in a $6 I'm loving it.


----------



## dave2012

A great week to own ACQ! I was getting pretty over weight buying extra on the recent dips so I'll gladly take some profits.

Still one of my largest holdings.


----------



## the-royal-mail

Thanks for the info! Would that auto123 company be in a similar line of business?

Yes, I have been following this stock this week and for the past couple of months. I should have bought when it was $39 as this would have been a heck of a deal. Over 15% performance in the past 2 months.

Looks like strong evidence to indicate the age of the automobile is far from a thing of the 1950s as some like to claim. Looks like this business is alive and well though it can of course dip with poor economic news.


----------



## marina628

My only regret on this stock is selling out everything at $24 and only putting $5000 back when it got to $30.


----------



## jamesbe

royal mail, no auto123 is just a autotrader type site and magazine.


----------



## doctrine

Autocanada is now over $1B in market cap. I would bet they will be added to the S&P Composite in the near future. Annual results next Thursday (20 Mar).


----------



## jamesbe

So you are saying buy more?  haha


----------



## the-royal-mail

Actually james, wouldn't this be a great time for _you_ to SELL, given what you paid? Your return was excellent, maybe quit while you're way ahead?


----------



## jamesbe

I keep debating that.... I did cash out some at one point. I have nowhere better to put it right now though...

After earnings it is going to go up again I'm guessing. I should set a target... $60 maybe.


----------



## OptsyEagle

jamesbe said:


> I should set a target... $60 maybe.


I love seeing a well thought out investment strategy, at work. lol 

Hey you did well. Who am I to kid. Good luck.


----------



## jamesbe

Total cash I put in I think was only $2000 So it's not a huge loss either way.


----------



## OptsyEagle

Well I bought around $3.00 per share and sold a little over $13. Made a lot of money but obviously I lost more money by selling then I made from buying, although if I keep making this mistake enough times, I will retire a very rich man.

Anyway, it seemed like a stupidly low price at $3.00 a share. Even though we were in the midst of the worst recession in many of decades, they made over $0.25 per share from their repair business alone. So I figured, even if no one ever bought another car from them, the downside was pretty limited. There were a few other things going on, like Chrysler taking away their floor plan credit. That was pretty scary, but again, if worst came to worst, they could just fix cars.

Hard to believe it trades over $46 today. Never would have dreamed it in 2009.


----------



## FrugalTrader

@OptsyEagle, the real question is, what companies do you like today?


----------



## OptsyEagle

I wish I had a big list your you FT but unfortunately there were considerably more great stock opportunities in 2009 then I seem to be able to find today.

It's funny how when you have had 4 or 5 years to pick up one great company after another, at below 10 times earnings, you just find it so darn expensive to pay 15 to 20 times earnings, like is the case for most stocks today.

I use to pay those types of multiples all the time for stocks in 2004, 2005 and 2006, but ever since the 2009, "Everything must go" blowout sale, that the stock market put on, I've become so very cheap in my purchases and hence I am having a hard time finding great stocks.


----------



## FrugalTrader

@OptsyEagle, Sorry to bring this thread off topic, but are you mostly cash now?


----------



## OptsyEagle

No. I have a lot more cash then I normally do (maybe 35% cash) but it comes from selling some stocks and not finding new ones to invest into.

I don't try to time a market but I suppose the above is a warped form of market timing that so far has not been working very well...well except today. lol.


----------



## jamesbe

$60 here we come lol.

Earnings report is Thursday I think.


----------



## the-royal-mail

$49.83, or an increase of 27% since I started watching it in late Jan of this year. Wow.


----------



## dave2012

Headed for $51. I started buying in September of 2012 and its become my largest holding. Hard to sell some, but I'm getting really overweight with recent gains. More than makes up for my losers lol.
Look forward to the earnings report on Thursday!


----------



## jamesbe

I went and looked at my history of this again as I was considering cashing out.

Well I was pretty smart when I bought it. I sold half my position when it doubled. Essentially cashing out my initial investment. So I have zero skin in the game right now yet it's worth nearly $10k in my portfolio. Gotta like that scenario. Had myself thinking I should take half now and keep taking half every time it doubles.... lol


----------



## BullAllTheWay

Stocks like ACQ do wonders for a portfolio. My average price is 2$.


----------



## Killer Z

jamesbe said:


> I went and looked at my history of this again as I was considering cashing out.
> 
> Well I was pretty smart when I bought it. I sold half my position when it doubled. Essentially cashing out my initial investment. So I have zero skin in the game right now yet it's worth nearly $10k in my portfolio. Gotta like that scenario. Had myself thinking I should take half now and keep taking half every time it doubles.... lol


Just like playing blackjack.


----------



## doctrine

If there's one thing I've decided to do a lot less of its selling or trimming winners. All of my ACQ dividends have been reinvested elsewhere but I still hold the 820 shares I bought at $6.30.

Here, see this article in a local newspaper about the recent purchase of 70% stakes in two GM dealerships. A lot of insight into the reasons they sold. One of the biggest factors is online. I've heard the CEO speak about this before. Autocanada can apply more resources from a central office to all of their dealerships to manage online sales and research, which are becoming a bigger and bigger factor. On their own, the dealership felt they couldn't compete and were willing to give up a big stake to let Autocanada manage it.


----------



## GoldStone

doctrine said:


> If there's one thing I've decided to do a lot less of its selling or trimming winners.


That works great as long as the winners don't crash.


----------



## doctrine

Results out.

https://pictures.dealer.com/autocanadatc/e1bce8620a0d028a01e6ee98ee19fdd7.pdf

EPS in Q4 2013 were 28% higher than Q4 2012, which I believe is a solid result for the bottom line as it includes the offering of shares last year. Margins are holding and revenues are way up. Full year EPS were up 50%.

They also increased acquisition guidance to 10-12 dealerships over the next 24 months, and are hinting they might acquire an auto group which could increase that guidance further. Apparently they are seeing higher numbers of larger and more profitable dealerships coming to them to sell their dealerships.

The P/E is not cheap at 27 but if they can maintain 28% EPS growth with that revenue growth and maintain margins, they'll be making a lot of money. Despite dividends being up 22% year over year, dividend payout ratio (current dividend compared to 12 month trailing earnings) has dropped from 58% to 48% compared to a year ago.


----------



## Synergy

^ Solid results. Setting itself up for a good 2014.

I wasn't surprised to read the following:



> Over the past 15 months it has become apparent to Management that the Canadian dealer succession issue which industry analysts have been forecasting over the past number of years is beginning to materialize. As such, the Company has experienced a significant increase in the number of interested sellers of auto dealerships in Canada and has noticed that many of these opportunities are large, more profitable premium dealerships.


http://money.msn.com/business-news/article.aspx?feed=PR&date=20140320&id=17453906


----------



## the-royal-mail

Thanks doctrine for the info. It makes it very tempting to buy, but the price is very high. Wish I knew where the ceiling was.


----------



## Ethan

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

-Warren Buffett


----------



## PatInTheHat

Ethan said:


> It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
> 
> -Warren Buffett


How I regret not jumping on the discount at the end of january. Even the contrarian in me is considering putting some into this at these crazy high prices.


----------



## dave2012

Another glorious day for ACQ shareholders! Great earnings report. Headed past $53.50 now. Great way to head into the weekend.


----------



## Synergy

Great stock, up over 45% since my purchase on Jan 29th, 2014.


----------



## jamesbe

money,money moooney haha


----------



## the-royal-mail

$53.52 now. 

What goes up must come down, folks.

I still feel this is a better time to SELL ACQ than to buy, but what do I know?

Madness.


----------



## blin10

insane


----------



## Ethan

the-royal-mail said:


> $53.52 now.
> 
> What goes up must come down, folks.
> 
> I still feel this is a better time to SELL ACQ than to buy, but what do I know?
> 
> Madness.


On January 23 you wrote:



> Very interesting. Anyone know why 2013 was such a banner year for this stock? Now at $38.66, down from it's Jan 16 high over $45. *Seems to be on a long, slow downward trend*.


Why the pessimism?


----------



## Killer Z

I feel like I am sitting at a Formula 1 event watching this stock continue to rip by me ........just can't seem to pull the trigger.


----------



## PatInTheHat

Synergy said:


> Great stock, up over 45% since my purchase on Jan 29th, 2014.


Well played sir. Nothing but regrets.


----------



## Synergy

PatInTheHat said:


> Well played sir. Nothing but regrets.


Luck of the draw...


----------



## doctrine

I think you will see buying opportunities again. ACQ fell over 18% from 16 Jan to 29 Jan. Perhaps on a financing if they get a really big deal.



> “A year ago, I can tell you, we weren’t talking to any dealer groups,” said AutoCanada chief executive officer Pat Priestner. “Today we’re talking to a number of dealer groups; they could range anywhere from four to five stores to probably 15.”


http://www.theglobeandmail.com/repo...olidation/article17615209/#dashboard/follows/


----------



## jamesbe

My guess based on previous trends with this stock is $52 on monday. Tuesday - Wednesday it will bounce between 52-49 Then it will go down to 48 maybe as low as 46.

It will then slowly climb to 48 again after a few weeks / months. Then in May they will announce the new dividend increase and it will spike to 52 and slowly rise to 55 again.


----------



## jamesbe

Or it will just climb lol


----------



## Synergy

^ ACQ has a mind of it's own, it's on a mission!


----------



## LOST

I like this stock a lot. I am doubling down and going for broke. Watch the interview with Verika Hirsch on BNN. She makes a good argument for this thing to double with only 3% acquisition of the 3400 dealerships. I am also going to sell the PPL entry into the TSX 60 on Monday. She is one smart lady and seems like somebody you can trust. Giddee up!!!


----------



## jamesbe

Everything I read and hear about this company is positive. Heck I knew the stock was going to climb last week I really should have dropped a few g's into it before earnings were announced, it was about a 10% gain in 2 days.

I've gained so much out of this stock, part of me says cash out and thank your lucky stars. The other part of me says, this thing is going to buy me a new car lol


----------



## liquidfinance

Wow. I don't know why I torture myself by reading this thread. Still kicking myself


----------



## humble_pie

jamesbe said:


> I've gained so much out of this stock, part of me says cash out and thank your lucky stars. The other part of me says, this thing is going to buy me a new car lol


i'm not fortunate enough to own this stock but i'm not torturing myself either ... instead very happy for all the cmffers who are benefiting.

i wouldn't sell, though. I was impressed by that community newspaper article somebody linked upthread. I skimmed the article briefly - not a shareholder here - but what i gathered was that a 3-generation successful car dealership in a small prairies city had sold a large part of itself to ACQ. Not all of itself - the grandson would still be working full-time in the biz & he still owned part of the biz. But he saw the writing on the wall, he knew that his family dealership would require important internet access to survive & only a partnership with ACQ would be able to offer that.

they've said that a lot of family-owned car dealerships are in that exact same category, so room for ACQ expansion is still abundantly present.

it's considerations like these that would tip me in favour of holding onto my shares, if i were lucky enough to own em.


----------



## donald

I have heard twice now(once on bnn)and just yesterday reading a ''ask'' thing on reddit Peter hodson recommend this company(and others)seems like a bay street darling which would make me nervous.(gets a lot of pumping,maybe for good reason)

humble:nice ode to the deep south,was wondering what happened to was it ''kate'' I forget.


----------



## the-royal-mail

$60.49 right now, for an increase of over 55% since I started watching this on 23-Jan-14.


----------



## Ethan

AutoCanada announced this morning they have purchased an 80% stake in a GM dealership in Winnipeg.

https://pictures.dealer.com/autocanadatc/181ea6e10a0d028a01fffa73a3c6df51.pdf


----------



## jamesbe

And have been approved for Cadillac and Buick


----------



## Ethan

The market is getting a little carried away with today's news. The dealership they bought today retailed 1,113 cars last year, a similar amount to Winnipeg's Eastern Chrysler Jeep Dodge Ram ACQ picked up last year (1,130 vehicles retailed in 2012). ACQ paid $21.9 million for 100% of Eastern Chrysler Jeep Dodge Ram, making me suspect they paid slightly less than this amount for 80% of McNaughton. Even if ACQ paid $20 million, that size of purchase is hard to justify a $100 million increase in the market cap of ACQ.

I think some of today's price increase is because the market believes ACQ is back on an acquisition spree, they've acquired 3 dealerships in the past 2 weeks after several months of inactivity. ACQ's financials do not validate the current share price, there is a lot of future acquisition priced into today's share price in my opinion. Hopefully they can keep buying dealerships at reasonable valuations.


----------



## Killer Z

Ethan said:


> The market is getting a little carried away with today's news. The dealership they bought today retailed 1,113 cars last year, a similar amount to Winnipeg's Eastern Chrysler Jeep Dodge Ram ACQ picked up last year (1,130 vehicles retailed in 2012). ACQ paid $21.9 million for 100% of Eastern Chrysler Jeep Dodge Ram, making me suspect they paid slightly less than this amount for 80% of McNaughton. Even if ACQ paid $20 million, that size of purchase is hard to justify a $100 million increase in the market cap of ACQ.
> 
> I think some of today's price increase is because the market believes ACQ is back on an acquisition spree, they've acquired 3 dealerships in the past 2 weeks after several months of inactivity. ACQ's financials do not validate the current share price, there is a lot of future acquisition priced into today's share price in my opinion. Hopefully they can keep buying dealerships at reasonable valuations.


Investors on the sidelines have been looking for an excuse to jump into ACQ .............any positive news should be enough to create a buying frenzy. ACQ is officially the darling of the TSE right now .......for how long is yet to be determined. 

P.S. I continue to be one of those investors on the sidelines. My belief remains that I missed out on this one when it crossed the $50/share mark, and as such, I am simply enjoying watching the run from the bleachers.


----------



## OptsyEagle

Doesn't anyone get concerned that ACQ gets to pay 80% of the cost of this acquisition and the CEO only has to pay 20% and has 100% control of what he wants to do with all the profits from that dealership. Pay a dividend to ACQ or a big bonus to himself. Hmmmm, decisions, decisions.

It use to be 49.9% ACQ and 50.1% CEO, but all of a sudden now the CEO has figured out that ACQ shareholders could not care less about their company, only the value of their stock, and decided paying only 20% is a lot better, since no one has any objections.

I mean common people.

I know this post goes against the grain here, but just be careful. When this type of conflict of interest goes unchecked it usually gets a lot worse, not better.


----------



## Ethan

The ownership structure is unconventional, but it has to be structured this way in order for ACQ to buy into GM dealerships. If Mr. Priestner started paying unjust, material bonuses from these investments that would be reflected in the financial statements. The financials get stronger each quarter, so I have no cause for concern yet.


----------



## OptsyEagle

Ethan said:


> If Mr. Priestner started paying unjust, material bonuses from these investments that would be reflected in the financial statements.


Do you really believe that or do you just really want to believe that? A few big bonuses, skimmed off the top will be no problem for him. 

I am sure you will notice it someday, but it will be by the stock cratering, not any review of their financial statements.

Anyway, maybe he is a very honest and ethical guy. None of us can really say. I mean, aren't most people that work in the auto sales industry the most ethical people you have ever met? lol.

Anyway, good luck. Just thought I would mention it.


----------



## Ethan

OptsyEagle said:


> Do you really believe that or do you just really want to believe that? A few big bonuses, skimmed off the top will be no problem for him.


Are you suggesting that Mr. Priestner could skim a few big bonuses off the top that wouldn't be reflected in the financial statements?


----------



## marina628

I got out of this stock already but today on BNN one of the guys there said he would not be surprised if it doubled in next 12 months.So not sure what to do except maybe flip a coin lol


----------



## doctrine

I believe the GM investments are a long term necessity for ACQ to convince GM, Ford, Honda and Toyota to permit them to own their dealerships. That being said, there was nothing in today's news to justify a 8% gain other than gaining the attention of more investors who want to own stock seeing that the CEO is backing up his predicted acquisitions with action. 

There will be an equity raise at some point that will likely push the price back down. Last equity raise was at $25 and the stock definitely fell 10% (from $29 to $26 before rebounding), so certainly buying opportunities await again in the future. If it gets too far ahead, I would expect shorts to start pushing the price down as well - the stock is now more than liquid enough. Not sure that an equity raise would be much above $50 at this point unless this higher stock price sticks around.


----------



## Ethan

AutoCanada has signed agreements to purchase 8 dealerships.

http://www.prnewswire.com/news-rele...update-on-acquisition-pipeline-257128171.html


----------



## doctrine

That's pretty crazy. They used to have less than $1B in revenue just a few years ago. Now they're buying 8 dealers with over $422M in revenue and presumably another $80M in gross profit.


----------



## Synergy

ACQ will release its earnings report for the three month period ended March 31, 2014 on Thursday, May 8, 2014 after the close of markets. 

If it ever pulls back again I'd be happy to buy more.


----------



## JordoR

Wow... a 73% increase in the last 3 months. I was on the fence whether to buy this or not back at the end of January - and obviously wish I had :02.47-tranquillity:


----------



## jamesbe

Synergy said:


> ACQ will release its earnings report for the three month period ended March 31, 2014 on Thursday, May 8, 2014 after the close of markets.
> 
> If it ever pulls back again I'd be happy to buy more.


Thanks for that. I expect it will rocket up on the 9th. I'll sell then. And buy back on the dip haha


----------



## the-royal-mail

It just hit $65. I bought this one last month and have been happy with it thus far. Seems to be rockin' and rollin'.


----------



## JordoR

Up above the $70 mark today... there just seems to be no end.


----------



## jamesbe

I put in a sell order at $70.50 it was at $70.42 at one point! Get me out while the going is good (half of my holdings lol)


----------



## jamesbe

Revenue up 28% stock down. Go figure.


----------



## Synergy

jamesbe said:


> Revenue up 28% stock down. Go figure.


Perhaps it has something to do with weaker than expected quarter for new vehicle sales / margins. Overall the results looked good to me.



> "The improved operating results in our used vehicle departments and our parts, service and collision repair departments on a same store basis more than offset what we would consider to be a slightly weaker than expected quarter for new vehicle sales and new vehicle margins".


----------



## jamesbe

It's raining and the market is down today. It's just a mood. A sunny mother's day and Monday will be booming lol


----------



## Ethan

Absolute numbers are not going to be meaningful when evaluating AutoCanada because they have been issuing equity to purchase dealerships. 1 year ago they had 19.8 million common shares issued/outstanding, now they have 21.7 million shares issued/outstanding. While first quarter earnings increased 21.6%, on a per share basis they only increased 11.0%. Compared against a share price increase of 188% over the same time period, it is reasonable to me that the shares have gone down today. Analyst estimated EPS were $0.41 and actual was $0.38 which shows the market was expecting more.

I sold 200 shares at $72 last week but I'm still holding just over 1,700 shares. I think this is just a hiccup.


----------



## Synergy

I'm not saying the price drop today wasn't warranted based on the current earnings release but Q4 2013 came in below analysts expectations with regards to EPS: estimated EPS of 0.45 vs actual EPS of 0.41 and there was a nice pop in the share price that day. Perhaps there was other noteworthy information at that time that helped to propel the stock higher - planned acquisitions, etc.


----------



## Ethan

Up 7% so far today on no news. Day traders must love this stock.


----------



## the-royal-mail

I have to think that Friday's dip to $64 got everybody excited, it hit $73 this afternoon.


----------



## Synergy

Ethan said:


> Day traders must love this stock.


I was thinking the same.


----------



## jamesbe

I sold half my shares for a $10,000 profit. I'll ride the rest for awhile lol


----------



## doctrine

It looks like they might be issuing up to $150M of debt to pay for acquisitions. Also, Globe and Mail postulated the dealer group they are referring to is Hyatt Group in Calgary. A booming market, for sure.


----------



## jamesbe

Synergy said:


> I was thinking the same.


Really is a day-traders dream. Yesterday it was down to $67 or $68 again and today back up 4% I thought about diving in just for the upswing guess I should have!


----------



## Ethan

AutoCanada has received approval from BMW Canada to buy a BMW and a MINI dealership in Montreal.

http://www.newswire.ca/en/story/135...ces-oem-approval-for-bmw-and-mini-dealerships

I'm assuming the 8 dealership purchases they announced in early May refers to the 6 Hyatt's in Calgary and these 2 in Montreal.


----------



## the-royal-mail

ACQ and RY now have same stock price of $75.55. Madness.


----------



## HaroldCrump

the-royal-mail said:


> ACQ and RY now have same stock price of $75.55. Madness.


Not at all.
Nominal stock price is meaningless.
What matters is the market cap.
Which is nowhere even close


----------



## the-royal-mail

Oh well. I had to try. 

ACQ is at $76.36 now. Party at jamesbe's house.


----------



## PatInTheHat

I just can't bring myself to buy this one but I imagine i'll be here saying the same thing after it has doubled again ;(


----------



## the-royal-mail

^ at least try a swing trade next time it dips. It's so easy with this one. I made a cool $400 by speculating on this stock but would obviously have made much more had I tolerated the volatility and stayed in the game. It's all good.


----------



## JordoR

PatInTheHat said:


> I just can't bring myself to buy this one but I imagine i'll be here saying the same thing after it has doubled again ;(


Yeah I said the same thing back in early February when it was at $37..... Oh well can't win them all.


----------



## Canadian

I kick myself every time I see this stock continue higher. I looked at it two years ago but didn't have the cash to start a position. I kinda forgot about the stock and a long while after it had risen considerably and I thought it had its run - I was wrong! I have the same sentiments as Pat about the not-buying-but-wouldn't-be-surprised-if-it-doubled feeling.


----------



## doctrine

ACQ is so volatile. A week ago Wednesday, it was at $72.50. Two days ago, it traded as low as $67. Today, it hit $77.18. For my position, that's a $4500 drop followed by a $8350 increase.


----------



## Canadian

That sounds like a swing trader's dream lol. At this price it would take a lot of cash/margin to make trading worthwhile though IMO.


----------



## jamesbe

Typical if only, this is one of those had I put in more at the start I could have retired geez.


----------



## JordoR

Is there any end to this thing! Hit 86.85 this morning... man I missed out


----------



## jamesbe

Wholly geez! Was poking my father-in-law the other day. I told him to get in at $8 he didn't lol


----------



## Ethan

This is insane. Even with ACQ's impressive growth, a PE ratio approaching 50 is difficult to ignore. I've sold shares in the past 2 months at $72 and $78.68 but am holding onto the bulk of my shares still.


----------



## OptsyEagle

This just adds to what I have always known: I have lost considerably more money selling stocks that have gone up, then I have ever lost buying stocks that went down...and I have bought a lot of stocks that have gone down.


----------



## blin10

insane, from a past experience (and I got lots), a lot of times if stock cracks $90 mark it will crack $100 mark and looks like that's where acq is going


----------



## jamesbe

Yeah I sold half my position at $70. So I lost a lot of upside, but thankfully I kept half my position so not a total loss.


----------



## PatInTheHat

12 green days in a row. Anyone who owns this disgusts me!.. Must be tough having to look at how much you are up everyday


----------



## Synergy

Broke $90 today, my TFSA is one happy camper - up over 140% in just a few months:encouragement:


----------



## Ethan

I'm up 700% in 2 years in my TFSA. I've made more than $30,000 on ACQ this year alone.


----------



## marina628

Wull jungle disappeared and he was the first one to spot this stock so I guess he has his own island now with the profits lol.I have bought at $6.00 and as high as $60.00 and twice got out thinking it must pop soon but still up 19k and holding.


----------



## Killer Z

This is a complete momentum stock at this point ......one can attempt to trade in and out of it at these levels to try to turn a quick profit, however I would not consider that to be a sound investment strategy.


----------



## Ethan

Last Wednesday, ACQ traded as low as $81.21. On Friday, the stock reached an all time high of $91.72. Today, the stock has traded for as low as $83.72. That is a ridiculous amount of volatility over a 5 day period with very little news. It's as if everyone trading this stock has ADHD.

I first bought shares at $11.47. The share price swings by nearly that much in a week at this point.


----------



## Synergy

I really should use a bit of fun money and try to trade this thing. Buy today or tomorrow and watch it go over $100 in a few wks. Sell those shares and repeat on the next dip. Easier said than done...


----------



## donald

congrats ethan well done sir!is this still a buy now?lol.....acq is like a freight train(in hindsight it makes sense since the mom and pop dealerships are All liquidating
looking at this with a fresh pair of eyes...buy/sell or hold?


----------



## Ethan

donald said:


> congrats ethan well done sir!is this still a buy now?lol.....acq is like a freight train(in hindsight it makes sense since the mom and pop dealerships are All liquidating
> looking at this with a fresh pair of eyes...buy/sell or hold?


Thanks. ACQ is a cautious hold for me, they're a great company with an insane valuation.


----------



## the-royal-mail

Bit of a bargain at just above $82 this morning but there must be a lot of bargain hunters as it is now over $86. Volatile indeed!


----------



## dave2012

I've made more on ACQ than any other holding I have or ever have owned. I don't mind the short term volatility at all. Just missed an order to buy at $82.25 this morning. Sold some at $86.75 an hour later. The daily swings can be quite profitable if you're on top of it and have the cash to play.


----------



## nakedput

anyone short?

-market cap has exploded 5x over the past year
-3-4x higher valuation than US peers
-rise in rates seemingly in 2015-16...less cheap money for consumers
-currently at the highest S&P TSX ever
-what happens if the overheated housing rolls over, and oil takes a dive?

too risky for me...especially with a stock that has tripled in a year.


----------



## doctrine

Yep, very expensive, although I am certainly not short. They've just been added to the S&P TSX Composite, will be effective 20 Jun.

http://www.marketwatch.com/story/sp...nges-to-the-sptsx-canadian-indices-2014-06-13


----------



## JordoR

Anyone buying back in this morning? Saw it go as low as 80.3


----------



## Synergy

JordoR said:


> Anyone buying back in this morning? Saw it go as low as 80.3


I'm considering buying a few more shares if it drops below $80.


----------



## the-royal-mail

It was in the 70s this morning. I placed a scheduled limit order that was likely filled very early, hopefully in the 70s. Good time to buy on this dip for a bit of instant gratification profit. Already at $82.40.


----------



## doctrine

ACQ did close the Hyatt purchase of 6 dealerships, which on its own will boost the # of car sales by 18%. The purchase also contained the exclusive right to open a new Nissan dealership in Calgary, which is like getting 7 dealerships for the price of 6. In total, they've acquired 10 dealerships in the last month.


----------



## the-royal-mail

Thanks doctrine. How much are you up now?

$83.79, up over 4% for me for today.


----------



## HaroldCrump

Secondary shares issue at $78.
Lowest the stock went today was $78.77.

It seems the dilution was expected by the market.
Stock will probably trade in the $78 - $83 range until the issue closes.


----------



## Lena100

The stock is too volatile - it looks like a number of people are shorting it. 4,490,000 shares means more shares to short...


----------



## Synergy

Picked up a few more shares at $78.80 for my RRSP. Secondary offering expected to close on July 11, 2014. We'll see how this plays out...


----------



## the-royal-mail

The main stock is trading at $75.09 right now and has been sliding downwards since last month. Hopefully next week the price will start to go back up? Hoping the party isn't over now.


----------



## marina628

I dumped all my remaining stock when I read this http://seekingalpha.com/article/2292655-autocanada-ceo-sells-millions .


----------



## CPA Candidate

marina628 said:


> I dumped all my remaining stock when I read this http://seekingalpha.com/article/2292655-autocanada-ceo-sells-millions .




Additionally, the stock has gone up way too fast and many investors seem to be chasing performance. I don't put much stock in technical analysis, but other people do, and now that's its broken the 50 day MA, there is nothing but air until the 200 day.


----------



## Synergy

ACQ broke the 50 day MA in the past. The next level of support appears to be around $70.

They announced today "Closing of Equity Financing and Secondary Offering". As long as the markets don't continue to sell off next week I could see buyers coming back. Combine a richly valued stock with a market in need of a correction and you have yourself a risky trade on your hands.

Buy the dip has worked in the past, but one day it won't!

Currently trading at $73.41


----------



## the-royal-mail

Seems strange how the secondary offering seems to have killed the excellent momentum the stock had developed until June 26. I guess next week will tell the tale.


----------



## Butters

RBC upgraded to outperform and put a$92 tag on it
Still too expensive for me


----------



## Ethan

ScotiaBank has a $93 price target as of July 11, 2014. This represents 22.5x their forecasted 12 month earnings from Q3 2015 through Q2 2016.


----------



## the-royal-mail

Looks like the good times have ended for this one. $71.24. james, you may want to sell the rest of your position before it goes down much further. I have been wrong before on this one but things have been bad for ACQ for over a month now.


----------



## Ethan

the-royal-mail said:


> Looks like the good times have ended for this one. $71.24. james, you may want to sell the rest of your position before it goes down much further. I have been wrong before on this one but things have been bad for ACQ for over a month now.


Has something changed in the underlying business that makes you want to sell? If not, wouldn't a drop in the share price represent a buying opportunity? If you were happy to buy at $80, wouldn't you be happy to buy more at $70?


----------



## jamesbe

At this point for me it's just a hold. I have zero cash invested, it's all bonus money from the gains now. Everything is down, I'm a long term holding on everything I have.


----------



## Synergy

Ethan said:


> Has something changed in the underlying business that makes you want to sell? If not, wouldn't a drop in the share price represent a buying opportunity? If you were happy to buy at $80, wouldn't you be happy to buy more at $70?


The only things that appear to have change are the recent secondary offering and some news on potential future US competition. There could be some further weakness if markets decide to have a little 5-10% correction, but $70 could turn out to be a decent buying opporunity. The price fell 20+% back in January 2014 for no particular reason and it turned out to be a good buying opportunity.


----------



## the-royal-mail

Share price has been soft since around June 25. Hopefully this is just a blip.

What changed in my mind is the recent secondary share sales offering seems to have taken the wind out of sails of the stock. At the same time, the CEO unloaded a lot of his shares right before that happened. Lastly, ACQ has had a lot of acquisitions. Perhaps investors have lost their appetite? Here's a quick blurb confirming the CEO share sale, there may be better sources.

http://canadianvalueinvesting.blogspot.ca/2014/06/autocanada-ceo-sell-millions.html


----------



## Ethan

The equity financing and secondary offering was announced on June 25. If one didn't like that deal, I can understand selling shares in the day or two after the announcement. I hardly see it as a reason to sell more than 1 month later after the shares have fallen 15%.


----------



## PatInTheHat

This one is long long long overdue for a correction and some consolidation. The model and long term outlook are still strong. Finally a chance for us guys on the side to get a piece!


----------



## FrugalTrader

Secondary offerings are often the kryptonite for momentum stocks. However, this may be another opportunity to dabble.


----------



## doctrine

Car sales are booming, ACQ is now far larger than it was even a year ago. And remember, most of their dealerships are in the west where the economy is just booming. Should be great results over the next few years as they consolidate.

http://www.cbc.ca/news/business/ford-up-15-chrysler-up-7-as-canadian-car-sales-boom-1.2725321


----------



## Ethan

2nd quarter results were released last night. Earnings per share increased by 10.5%, and the quarterly dividend was increased by $0.01/share to $0.24/share. This is the 14th consecutive quarter that ACQ has increased their dividend.

https://pictures.dealer.com/autocanadatc/b2eb86a40a0d028a011775bcdbe909d4.pdf


----------



## Synergy

^ Obviously someone doesn't like these numbers - down approximately 6.5%.


----------



## doctrine

Well, fundamentally you can't argue with the results - all great. The results also don't reflect the 10 new dealerships they closed in the last month. 

Also nice to see record revenue and that they're maintaining gross margin. The numbers on the top line are very, very impressive (revenue, EBITDA growth), which looks very good for future earnings growth potential.


----------



## Ethan

The consensus forecast among analysts was for ACQ to earn $0.62/share in Q2. Earnings came in at $0.61/share. Naturally, the share price declined $6.35.

http://www.edmontonjournal.com/news...anada+stock/10102681/story.html?__federated=1


----------



## Synergy

Ethan said:


> The consensus forecast among analysts was for ACQ to earn $0.62/share in Q2. Earnings came in at $0.61/share. Naturally, the share price declined $6.35.
> 
> http://www.edmontonjournal.com/news...anada+stock/10102681/story.html?__federated=1


Thanks Ethan, that makes sense now. Still looks good to me.


----------



## Ethan

AutoCanada announced they are buying another Chrysler Jeep Dodge Ram dealership in Calgary today:

http://online.wsj.com/article/PR-CO-20140813-910858.html

Weird how the stock is down 6% today. ACQ used to jump when they announced an acquisition.


----------



## blin10

what a fall... still too expensive for me


----------



## the-royal-mail

$61.59, or down 8.55% today alone.


----------



## leeder

Interesting name and dilemma. On the one hand, valuations on this stock are still very expensive. However, it's not often you see reasonable quarterly results and see a 15% drop in the past 3 months (and about 6% drop just today alone). I suppose the question is what the outlook is for the company to acquire more dealerships.


----------



## Synergy

Easy come, easy go. Still up over 60% overall so I shouldn't complain too much. Somewhat surprised by all the selling. Will be interesting to see if it goes down to test the 200 day MA.


----------



## Jon_Snow

Sort of getting interested in this.

This is why I like to keep a goodly sum of cash at the ready. Love raiding the bargain bin. :biggrin:


----------



## Ethan

AutoCanada is a great company. They continue to grow earnings through acquisitions and increased same store sales. The problem is the market does a very poor job of valuing ACQ shares. They were undervalued 1 year ago at $25, they were overvalued 2 months ago at $90. With the recent drop in share price, their PE ratio has fallen to 33. This is getting to close to what I would pay for a company with ACQ's growth potential. If the PE ratio falls under 30, I might buy start buying back the shares I sold over the last 3 months.

I hope the shares fall another $6; I love buying opportunities.


----------



## FrugalTrader

For those of you hitting yourselves for not buying near the 200 MA back in January, this may be your second chance!


----------



## humble_pie

what happens when the music stops playing & there's no extra chair to sit on, though.

some day all the generational dealerships will have been sold. Car sales are cyclical, someday there'll be a recession, unemployed won't buy so many cars, what then?

maybe they could start planning now to diversify. Brazil, mexico, malaysia, kenya. Markets that already have a first generation of car owners plus maybe ageing dealerships ...


----------



## the-royal-mail

You guys might want to be careful with this one. I don't know how closely you watch this stock, but I've been watching it very closely for most of 2014. The past two months have been brutal and the stock has been on a dramatic downwards slide. This week alone has been one of the worst and the value just keeps dropping. I know some of you think it's funny to slice and dice and pick apart my statements but I think the CEO share sale and June dilution were not well received by the market. I just don't have a lot of confidence in this one anymore, not after two straight negative months.


----------



## HaroldCrump

There are mounting concerns about the *massive growth in auto loans*, and the cavalier manner in which cars are being sold to all & sundry.

This industry is tied to record low interest rates (like housing), securitization of the auto loans, and lax lending standards.

The 2 largest domestic auto manufacturers have recently emerged from their tax-payer funded bailouts & bankruptcies, and have relatively clean balance sheets.
They are leveraging that to sell record amounts of vehicles to sheeple buyers.

Safety & reliability of the vehicles has been jettisoned and it is all about dumping as much product as possible on the market, heavily discounting the prices to clear the inventory.

This industry does not sound too healthy.
The auto-industry will, of course, survive in some shape & form and will continue to grow (esp. in the emerging markets), but individual stocks within the sector may have different fate (some will rise and some will bite the dust).

Given the volatility of this stock, IMHO a more conservative play on the auto sector can be the auto part manufacturers like Magna and to a smaller extent, Linamar.
Unfortunately, both are at all time highs, fueled by the same factors.


----------



## PuckiTwo

What is the reason for this sell-off? Couldn't find much info except that on Aug 11 Canaccord cut target price from 91 to 88. According to TDW market research ACQ missed earnings estimates 3 quarters in a row (4Q13 -0.04 / 1Q14 - 0.01 / 2Q14 - 0.01). P/E 33.2. Present yield 1.55. What am I missing? Do I read the information wrong?
I am interested initiating a position but afraid that it is too late. The auto industry has been good, lots of fancy expensive cars on the road, even in rural areas. Do people have the money to buy them or are the cars owned by the bank? What happens if rates go up? 
Is anybody buying at this price and/or initiating a position?


----------



## PuckiTwo

HaroldCrump said:


> There are mounting concerns about the *massive growth in auto loans*, and the cavalier manner in which cars are being sold to all & sundry.
> This industry is tied to record low interest rates (like housing), securitization of the auto loans, and lax lending standards.


Thank you Harold, you posted while I was still typing my questions. That's exactly what I wanted to know. P.


----------



## doctrine

My thoughts:

ACQ is all about valuation, not fundamentals. Fundamentally, it is a rock solid business. And operationally, they are really good at running dealerships. Apparently one of the GM dealerships they have been operating in Edmonton since 2012 has gone from one of the worst performers nationally to the #1 GM dealership in Canada within 2 years. 

I don't buy the auto lending problem as serious enough to destroy an industry, but I will agree ACQ, along with all auto stocks, will be hammered in a recession. Right now, auto sales are at records and increasing, and the economy here and in the US keeps expanding. It's a question of timing - when is the next recession? I think it's a couple years away still - and prepare for the monetary taps to open very wide if economic growth slows.

I would put ACQ's current P/E at around 25, possibly going a little lower depending on how quickly they buy new dealerships. Not cheap, but at least it isn't the P/E of 40 it was at > $90. A price fall to $50 would put them at a P/E of 20.

On the dividend front, there is plenty of dividend growth ahead as payout ratios have been dropping from 60% to 50% despite dividends being up nearly 50% in 2 years. The current yield is better now at 1.5% and similar to other high dividend growth stocks out there (HCG, CNR, CTC, etc).

So, the reason for ACQ dropping is entirely P/E multiple contraction as retail, momentum and technical players exit (or possibly short), to be replaced by long term institutional investors. ACQ is becoming more fairly valued. Really, I'm not surprised to see the stock at $60, nor probably at $50 either, although I think anything below $50 is getting into buying territory.


----------



## HaroldCrump

doctrine said:


> I would put ACQ's current P/E at around 25, possibly going a little lower depending on how quickly they buy new dealerships. Not cheap, but at least it isn't the P/E of 40 it was at > $90. A price fall to $50 would put them at a P/E of 20.


Operational excellence driven business usually trade at less than 20 P/E.
Magna and Linamar are trading between 13 and 15 P/E currently.
Your valuation of ACQ at around $50 is quite fair, IMHO.

It is another matter whether P/Es can actually predict the movement of stocks - that is debatable 

Regarding the recent earnings miss, I do not consider that as the reason for the sell off.
I think the sell off is more likely driven off the insider selling, the dilution, the valuation, or other factors (such as some large institution/fund getting out).
A relatively small earnings miss usually does not cause 33% sell offs.


----------



## doctrine

HaroldCrump said:


> Regarding the recent earnings miss, I do not consider that as the reason for the sell off.
> I think the sell off is more likely driven off the insider selling, the dilution, the valuation, or other factors (such as some large institution/fund getting out).
> A relatively small earnings miss usually does not cause 33% sell offs.


In my opinion, it's definitely valuation and momentum players exiting - a P/E of 40 is just ridiculous (I was close to selling some shares at $85-90, although I won't now). I think the dilution will be worth it, as they're acquiring dealerships at 5 times pre-tax earnings, a great price because of the lack of competition and the desire of owners to exit. It will be another year though before those numbers start filtering through to earnings; they still have $300M to deploy.


----------



## Ethan

Lot's of good discussion surrounding this stock.

I think lots of the fear relates to the recent share price drop. I'm not at all concerned by that, but that is likely a difference in methodology. I ascribe no value to technical analysis, preferring to read financial statements over charts. The charts don't like good, but if you ignore the share price and look only at the financial statements, I think you'll find an extraordinary company.

In regards to ACQ operating in a saturated market, with a limit to how many Mom and Pop shops there are available for sale, remember that ACQ operates 42 dealerships out of ~3,600 in Canada. They're barely 1% of the Canadian market and nowhere near saturation.

In regards to the sale of shares, this isn't anything new. ACQ issued shares in the summer of 2013 for $25/share, the stock didn't bat an eye as it remained above $25 during the issuance and continued its ascension to $40 by year end.

One item that might affect the share price is an increased supply of shares for sale from acquirees of ACQ. As ACQ's deals get larger, they've started paying for dealerships in a combination of cash and shares. Similar deals in other companies typically include covenants that restrict the acquiree from selling the shares of the acquirer for a certain period. Are we seeing the effects of dealers acquired 1-2 years ago selling their shares today now that they are presumably able to? Are we going to see a similar effect in 1-2 years when recent acquirees presumably get their chance to sell ACQ shares?


----------



## GoldStone

ACQ is up 39.7% YTD, not counting the dividends. What is the problem again?


----------



## Synergy

GoldStone said:


> What is the problem again?


Fear! Investors don't like volatility. It dropped over 25% back in January of this year for no particular reason. Turned out to be a great buying opportunity. Will history repeat, maybe, maybe not, but the fundamentals still look pretty good.


----------



## liquidfinance

I still kick myself for not getting into this at the start of the thread but now it has nothing compelling me to purchase it and I am not going to chase these gains. 

They have nothing to offer now. A p/e of 33.5 for a car dealership is simply madness. 1.5% yield offers little reward to wait. It's interesting to watch but I will remain on the sidelines.


----------



## CPA Candidate

Ethan said:


> In regards to ACQ operating in a saturated market, with a limit to how many Mom and Pop shops there are available for sale, remember that ACQ operates 42 dealerships out of ~3,600 in Canada.


The Canadian Automobile Dealers Association (CADA) puts the number of dealerships at 3200.

The consolidation strategy has an eventual end point and is not without its risks. I currently do financial reporting for a former publicly traded company that attempted a massive consolidation of a fragmented industry and many of the acquisitions did not work out as expected. When I saw the due diligence done on a recent acquisition and questioned it I was amazed at how simplistic it was. The issue as an investor is you don't know have enough information to know if management is making smart moves or just making moves. The role of options, ethics and corporate governance looms large as well. 

In addition, analysts love stocks like these, they present favorable opinions and hope to the company will issue shares underwritten by their brokerage. There is a very large conflict of interest here. The best thing you can do as an investor is stop listening to analysts recommendations and price targets.


----------



## el oro

For quick comparisons, I would think forward P/E would be more useful than trailing P/E for these types of growth/roll-up companies.

At this time, ACQ is still trading at 17.5x forward earnings. Compare this with the forward P/E of other consistent ~20%+ Canadian growth companies such as HCG (11), GIB.A (11.5), and CSU (15.5). Partially based on these current valuations, some of my money is on these three vs ACQ and actually added to GIB.A on Friday based on the price dip and latest solid earnings results and conference call comments.


----------



## Killer Z

Not sure if many of you are familiar with the Priestner family, but the CEO of ACQ, Pat Priestner, has a brother named Mike Priestner. Mike owns the Go Auto group. Go Auto owns 32 dealerships (or more, I've lost track) in Alberta and beyond. I do not believe it is too unlikely to see the brothers join forces in the near future. Just food for thought.


----------



## jamesbe

Darn should have bought more at $62!


----------



## Synergy

jamesbe said:


> Darn should have bought more at $62!


ACQ was trading below $61 on the 14th of August. I was waiting to see if it was going to test the 200 day MA before adding. Looks like I might have missed the opportunity, for now.


----------



## Ethan

Big day for AutoCanada. First, they opened a KIA dealership in Edmonton:

http://pictures.dealer.com/autocanadatc/eeadd2880a0d028a00d8431ca7767b8a.pdf

Then they bought a 75% interest in an Edmonton Chevrolet dealership:

http://pictures.dealer.com/autocanadatc/ef9a22cf0a0d028a00d8431c0f3f0367.pdf

Lastly, their share price is up 5%.


----------



## the-royal-mail

jamesbe, this stock has been on a downward slide for several days. Down to $66.64 (-1.23%) this morning in case you were interested in watching and buying more.


----------



## peterk

Anyone in for more of this at $54? I'm thinking of starting a position...


----------



## marina628

Wow I am shocked it fell so low !I got out a long time ago and don't think I will be getting back in.


----------



## doctrine

Somehow, I think Q3 results will be pretty good. Although who knows if they'll be good enough for the stock price. I bet it will be good enough for the dividend though, and an increase in book value.

http://www.cbc.ca/news/business/canadian-auto-sales-on-track-for-record-year-1.2784466


----------



## jamesbe

considering going in a again....


----------



## Synergy

doctrine said:


> Somehow, I think Q3 results will be pretty good. Although who knows if they'll be good enough for the stock price. I bet it will be good enough for the dividend though, and an increase in book value.
> 
> http://www.cbc.ca/news/business/canadian-auto-sales-on-track-for-record-year-1.2784466


Well it looks like the markets might agree to some degree, a nice little bump in the share price this morning (+5%).


----------



## Ethan

I'm not sure what to expect from Q3 results. Auto sales are strong and ACQ has brought online several dealerships since Q3 2013, so I have no doubt the earnings will be higher. The dilution from the recent equity offering will bring this number down. Selling all of those shares for $78 looks like a brilliant move for ACQ management considering what has happened to the share price since.


----------



## Ethan

Warren Buffett's Berkshire Hathaway announced they purchase a car dealership group this morning. Perhaps Buffett's entrance to the industry is a vote of confidence, and the reason for the share price increase today.

http://business.financialpost.com/2...ay-inc-buys-van-tuyl-car-dealership-business/


----------



## Ethan

One can now trade option contracts on ACQ. I've been waiting for this day for a long time.

I picked up 300 shares today at $56.96, and sold 3 April 17, 2015 $60 calls for $4.80.


----------



## Butters

Seems like they are at it again buying an Ontario dealership

I've been watching this for awhile but always higher than I wanted. I've been very eager especially after Warren Buffet bought a US car dealership company. 

Up what 5% pre market :-(
Bet it will hit 10% by the end of day


----------



## the-royal-mail

^ I wouldn't get too excited. While this stock had a huge spike in the early summer of this year, it has been on a downward slide since the end of June. Currently 8% down from the April 2014 level. Share price as low as $52 in the past few days. Be careful with this one.


----------



## Butters

I think it has a good base here. It will likely stay between 50-70 over the next 6 months

Just like the overall market had a correction. Things seem stable again. 

The 100%++ years are over but in 4-5 years 100% is on the table

Edit. Once they increase dividend again next quarter it will carry the momentum upwards. 

30 p/e seems large. That's why if you buy it now it might now moved much for 6 months. For 5 years though, if the continue buying dealerships for 7p/e and increasing the dividend. That's what holders want


----------



## doctrine

Volatile enough? Up nearly 20% since the low on Thursday. There's more and more interest in this sector, so it seems to be an ideal time to be holding.


----------



## the-royal-mail

This one has been doing well in the past couple of weeks. Good steady, upwards momentum. Now at $63.40.


----------



## Butters

They bought a stake in another dealership

I believe they report earnings tomorrow?

Keeps going up now will be $75 soon



Edit. Will we also see a boost in the dividend again?


----------



## doctrine

Results are out.

http://www.prnewswire.com/news-rele...nt-and-appointment-of-director-281861251.html

Pretty big numbers. Revenue up 82%, earnings per share (always one of the most important numbers) are up 45%, which is one of the biggest quarterly gains I've seen from ACQ. Same store gross profit up 11%. Not sure how the stock will react, it is up nearly 40% in three weeks when they dropped below $50, but I'd say that strategy of growth by acquisition is working out quite well. Happy to be holding my 820 shares, although it has been quite a ride this year from $45 to $91 back to $49 and now up to $70.

I'm not sure what the analyst consensus was compared to $0.74, but it seems close. 46% EPS growth is a monster hit for a billion dollar company. If it's a hit and the stock takes off, I could see another equity raise to keep the acquisitions going.


----------



## GoldStone

Quarterly dividend is up by a penny, from $0.24 to $0.25.


----------



## Synergy

doctrine said:


> I'm not sure what the analyst consensus was compared to $0.74, but it seems close.


According to WebBroker (TD), the mean EPS estimate was $0.72 as of 10/30/2014. Will be interesting to see how the stock reacts tomorrow.


----------



## jamesbe

LOL down 10%!


----------



## Ethan

I'm not sure if I've ever seen a company beat their earnings estimate, raise their dividend, and fall 10% on a day where the index is up 1%.

I also gave up any hope that this company would ever be reasonably priced months ago.


----------



## GoldStone

This stock is traders' dream. It jumped 40% in the preceding 3 weeks. I think they are selling on the news.

Amusing to watch, that's for sure.


----------



## jamesbe

Yeah I actually bought some more, it is still trending up so I took the dip today and I'll cash out when I make $500+ in a few days lol. Don't mind if I have to wait, but it seems if you play this stock right you can day trade it every day and retire haha


----------



## Butters

Smart move, they are changing their management to focus more on deals... will recover  wish I had some money to drop on this one!


----------



## Synergy

LOL is right.


----------



## doctrine

Thats two in a row that have dropped 10% (HCG/ACQ) after great results. Great on a relative basis, both definitely had good run-ups. Traders are taking profits; investors are buying the shares from them. I think if it hit $50, it'd be a definite buy with a 2% yield and 15%+ dividend growth per year.


----------



## jaybee

Tough couple of days for ACQ. Is it a buy under $50?


----------



## jamesbe

I would! No reason for it to drop that I see. Everything is awesome (lego reference haha)


----------



## Synergy

jaybee said:


> Tough couple of days for ACQ. Is it a buy under $50?


I just picked up a few more shares at $47.60. Seems like good value here, but who know where the price will go short term...


----------



## HaroldCrump

jamesbe said:


> I would! No reason for it to drop that I see. Everything is awesome (lego reference haha)


This could be a side-effect of the oil slide & its impact on the Western economy (jobs, etc.)
I wouldn't say there is no reason...


----------



## CPA Candidate

The volatility in this stock as of late is incredible.


----------



## Ethan

CPA Candidate said:


> The volatility in this stock as of late is incredible.


Here are some ACQ prices from 2014:

January 29 - $37.10
June 6 - $91.72
October 15 - $48.36
November 6 - $69.69
Today - $47.22

ACQ keeps growing their earnings and raising their dividend, it's amazing watching the market try to value them. I think I'd need some powerful halucinogenic drugs to understand the volatility in their share price.


----------



## jamesbe

It's a Tuesday so it's up 7% LOL

I knew I should have bought more at $47 yesterday


----------



## the-royal-mail

It was as low as $48.59 this morning and is now around $50.50. Good for day trader/swing trader types if you watch carefully and are able to act fast. Also need nerves of steel and the ability to lose money.


----------



## the-royal-mail

FYI, this seems to be at its usual low right now of $48.57. Maybe SheaButters is interested in executing a few extra trades in between his parcel deliveries.


----------



## marina628

I am not feeling it for this stock ,got out a year ago in the $71 range but since that sell off the summer by the owners I just don't feel right.Call it ESP or losing the gambling edge but I won't get on this ride again.


----------



## Butters

the-royal-mail said:


> FYI, this seems to be at its usual low right now of $48.57. Maybe SheaButters is interested in executing a few extra trades in between his parcel deliveries.


Very tempting. All my money is invested, nothing id like to sell. 
Today is my last day of FT letter carrier, went part time to finish school. won't be able to save $$ anymore :-(

I deliver to some 200 townhouses that are rented by Midwest In Edmonton. They have quite a few eviction notices this month. The office said people are getting laid off. I have a friend who works up north and he hasn't heard of layoffs yet. They did have a small earthquake 3 weeks ago and stopped for a day. 

I still think this is a $75 stock. 
It has few competitors and it's still largely the only public traded car dealership. The fact that Buffet bought a US company and ACQ has 3x the growth than US with much more to swallow. 

They will probably announce another 85% stake in a Ontario dealership and it will bounce 10% in a single day. Good opportunity to trade and a small but growing divy. 

This stock is getting closer to normal PE everyday it drops 

Only a matter of time before it gets added to more mutual funds and ETFs like CDZ

If you are sure of the canadian economy and more so alberta this is a good bet. 

However due to the recent bank misses, it's questionable.


----------



## Ethan

SheaButters said:


> This stock is getting closer to normal PE everyday it drops


The PE ratio right now is ~22.5, I think that's reasonable for a company with the growth prospects of ACQ. People were willing to pay more than 40x earnings this summer, since then ACQ has increased earnings and the dividend while adding a few dealerships. I'd have thought those who bought with the PE over 40 would be doubling down at 22.5, although it appears many base their decisions on the share price movement instead of the underlying business.


----------



## CPA Candidate

Ethan said:


> The PE ratio right now is ~22.5, I think that's reasonable for a company with the growth prospects of ACQ. People were willing to pay more than 40x earnings this summer, since then ACQ has increased earnings and the dividend while adding a few dealerships. I'd have thought those who bought with the PE over 40 would be doubling down at 22.5,* although it appears many base their decisions on the share price movement instead of the underlying business*.


I'd say the lions share of investors invest in stocks, not businesses. Even those that spent years obtaining degrees, designations, etc. end up chasing momentum where ever it is found and dump good companies immediately once momentum slows. If you are a buy and hold fundamental investor, you can get trampled in the flight to the exit I've found out through bad experiences.


----------



## Ethan

AutoCanada is now trading for 5.6% less than it was 1 year ago. This despite earnings through the first 3 quarters being 45% higher in 2014 than 2013. I think this stock is a screaming buy right now.


----------



## CPA Candidate

Ethan said:


> AutoCanada is now trading for 5.6% less than it was 1 year ago. This despite earnings through the first 3 quarters being 45% higher in 2014 than 2013. I think this stock is a screaming buy right now.


Yes, it is looking attractive.


----------



## jaybee

Ethan said:


> AutoCanada is now trading for 5.6% less than it was 1 year ago. This despite earnings through the first 3 quarters being 45% higher in 2014 than 2013. I think this stock is a screaming buy right now.


Agreed. I added to my position today @ $40.73


----------



## the-royal-mail

Other stocks are doing well this morning but ACQ is still just at $40.83 right now. Anyone going in?


----------



## jaybee

the-royal-mail said:


> Other stocks are doing well this morning but ACQ is still just at $40.83 right now. Anyone going in?


I added to my position today @ 40.73.


----------



## the-royal-mail

Yep, I see that now.  Your post wasn't yet visible to me when I posed the question.


----------



## Synergy

I've also been adding to my position in ACQ.


----------



## Ethan

I added a bunch to my position when ACQ was in the high 40's. I'm tempted to add more now but I've already allocated more to ACQ than I would like to. I'm going to sit on the sidelines today.


----------



## Jungle

What size of positions are you guys adding? I'm watching this one too...


----------



## Ethan

Jungle said:


> What size of positions are you guys adding? I'm watching this one too...


I currently hold 2,700 shares. I also sold a put option that will likely give me another 700 shares in April.


----------



## jaybee

Jungle said:


> What size of positions are you guys adding? I'm watching this one too...


I now have 1200 shares. That's it for me though. I'm holding goinf forward.


----------



## GOB

Half of ACQ's dealerships are in Alberta. Wonder how much of an effect (positive or negative) the drop in oil will have on the automotive industry there.

Seems like a lot of their higher margin vehicle sales are light trucks to companies in the oil patch, many of which are going to be slashing their capital budgets for at least the next year.


----------



## Synergy

GOB said:


> Half of ACQ's dealerships are in Alberta. Wonder how much of an effect (positive or negative) the drop in oil will have on the automotive industry there.
> 
> Seems like a lot of their higher margin vehicle sales are light trucks to companies in the oil patch, many of which are going to be slashing their capital budgets for at least the next year.


I just read those concerns from an article by the Motley Fool. Valid concerns. They also brought up some positive points to consider.



> But it’s not all bad. First of all, older vehicles tend to need more in repairs than new ones, which is good news for the repair side. Penny-pinching customers will likely look more at used vehicles rather than new, which tend to have good margins, especially in a world where people are forced to sell used trucks they can no longer afford.
> 
> Analysts have been predicting that AutoCanada’s earnings in 2015 will skyrocket to $3.42 per share. Perhaps that’s optimistic, but this is an important lesson on sentiment. Early in the year when shares last traded at these levels, earnings expectations for 2014 were just a little over $2 per share. Revenues have almost doubled in the meantime, earnings expectations are up, and shares are trading at around the same level. That’s pessimism rearing its ugly head.


http://www.fool.ca/2014/12/16/shoul...growth-darlings-amaya-inc-and-autocanada-inc/


----------



## Synergy

Jungle said:


> What size of positions are you guys adding? I'm watching this one too...


I'm just over a 3% weighting in ACQ. Absolute figures are meaningless as it's all relative to the net worth of the individual, relative % allocation, etc. For example, 5000 shares is chump change for a billionaire while it's an extreme allocation for someone with a 500k net worth. Just my opinion though.


----------



## Jungle

Yes I agree. I am very interested in adding this one, just wish it was Jan 1, to use new room in the TFSA.


----------



## el oro

I mentioned upthread three other high quality Canadian growth stocks preferable over ACQ back in August. They are up an average ~5% since then while ACQ is down ~37%.

ACQ has finally fallen far enough to consider starting a position but I wouldn't go as far as calling it a screaming buy.


----------



## Jungle

The only thing stopping me right now is how they are saying oil prices could still go lower, inventories are still high and production has not fully slowed down yet. Also they are saying opec may not consider an emergency meeting until
Summer next year. Husky just forecasted 60 oil and cut most of their spending in alberta. So I am being patient on this one to wait for the screening buy. Same with some of the oil shares on my watch list.


----------



## HaroldCrump

Massive layoffs already started in the US Shale oil patch.

_*Top US Oil States Are Taking A Hit From Plunging Crude Prices*_

The numpties should keep buying new cars, of course...


----------



## the-royal-mail

Interesting stock. It was under $40 this morning but now seems to be recovering along with the rest of the stocks I used to have. Lots of great gains this week but still tough to know what ACQ will do.


----------



## CPA Candidate

I don't see an Alberta slowdown ruining a growth-by-acquisition story. All the money in dealerships is in the repair shop, selling cars is not very profitable.

ACQ made a brilliant move of raising equity at nearly peak valuation, accretive per share transactions should be easy.


----------



## Ethan

CPA Candidate said:


> All the money in dealerships is in the repair shop, selling cars is not very profitable.


Exactly.

Gross profit by category, Q3 2014

New vehicles - $35.7 million
Used vehicles - $9.6 million
Parts, services and collision repairs - $38.9 million
Finance, insurance and other - $35.6 million

Gross margin by category, Q3 2014

New vehicles - 8%
Used vehicles - 6%
Parts, services and collision repairs - 50%
Finance, insurance and other - 91%


----------



## GOB

Agreed, but isn't finance (highest margin) directly related to new car sales? If new sales take a hit I expect the amount being financed will as well.


----------



## doctrine

Yes, profits will be hit, but remember that service costs are also counter-cyclical (they increase during recessions), and at current rates already cover 90% of the entire operating costs of the dealership. Thus, dealers are very recession resistant as increasing servicing profits cover (potentially decreasing) operating costs. This is why dealers tend not to go out of business even in the worst recessions of the last 40+ years.


----------



## My Own Advisor

I don't have the numbers doctrine, but I suspect the revenue from dealers comes from services vs. sales. This would be especially important in a recession, as some dealerships might close but the industry doesn't really collapse but just contract every few years. 

I've never really considered ACQ. Good for prospective buyers nearing a 52-week low.


----------



## Synergy

My Own Advisor said:


> I don't have the numbers doctrine, but I suspect the revenue from dealers comes from services vs. sales..


Post #451 from Ethan provides some numbers for ya. It should provide a rough idea of the revenues and margins for an average dealer.


----------



## OptsyEagle

Let's not kid ourselves here people. If NEW car sales decline or fall off the map, all the other revenues will soon be flushed down the toilet.

Dealer repairs are significantly more expensive then many other mechanical repair shops. Customers go to them because they have BOUGHT a new car and it is under warranty. If they didn't buy a new car and had to pay all the repair costs themselves, slowly they would figure this out. Sure a few would keep going under the false sense that a dealer's mechanic understands their car better, and their are a few repairs that they are best suited for, but it would not be enough to keep the game going.

New car sales is the key.


----------



## Ethan

OptsyEagle said:


> Let's not kid ourselves here people. If NEW car sales decline or fall off the map, all the other revenues will soon be flushed down the toilet.
> 
> Dealer repairs are significantly more expensive then many other mechanical repair shops. Customers go to them because they have BOUGHT a new car and it is under warranty. If they didn't buy a new car and had to pay all the repair costs themselves, slowly they would figure this out. Sure a few would keep going under the false sense that a dealer's mechanic understands their car better, and their are a few repairs that they are best suited for, but it would not be enough to keep the game going.
> 
> New car sales is the key.


Fortunately for shareholders of ACQ, October and November were both record months for vehicle sales:

http://www.theglobeandmail.com/repo...-23-as-record-pace-continues/article21423590/

http://www.cbc.ca/news/business/auto-sales-rise-3-6-setting-november-record-in-canada-1.2858067


----------



## CPA Candidate

Found this tidbit on Globe and Mail App today (Analyst upgrades/downgrades).

Vertias Investment Research analyst Varun Mehrotra rates ACQ a sell with a target price of $35.

Reasons:
OEM ownership caps of 5.0% (ACQ is at 3.6%). He says they can only acquire 30-35 additional dealerships.
Margins remaining flat, indicating no economies of scale
Key executives (especially outgoing CEO) permitted to buy dealerships privately and compete with ACQ.
ACQ management would not respond to Vertias inquiries.

For what it's worth, Vertias tends to be the boy that cried wolf. They have dumped on several stocks (DCI, CGI, EIF) with a lot of negative analysis/predictions that never came to pass. In September 2013 they rated DCI a sell with a $10.50 price target. Today it trades at $19.


----------



## BullAllTheWay

As far as I know, the CEO is not outgoing. In fact, his contract with ACQ has been extended this year until 2019. As for key executives permitted to buy dealerships privately, I know of only one doing that and it's the CEO. But what's not being said is that his involvement in some dealerships is required by some OEM (GM in particular), otherwise ACQ would not be permitted to acquire any dealerships from those OEM.
And about margins, I don't agree either. If you look at ACQ's last presentation, margins have been improving, and economies of scale are a reality.
Dealerships: there are thousands of dealerships in Canada. Opportunities are there, I don't see a handful of executives with a few millions in their pockets making much of a difference.


----------



## Killer Z

Very interesting article outling a potential conflict surrounding ACQ:

http://www.theglobeandmail.com/glob...estate-deal-raises-red-flags/article22644648/

I have been holding this position through it's slide .......no immediate plans to sell, but monitoring closely out of concern.


----------



## CPA Candidate

Killer Z said:


> Very interesting article outling a potential conflict surrounding ACQ:
> 
> http://www.theglobeandmail.com/glob...estate-deal-raises-red-flags/article22644648/
> 
> I have been holding this position through it's slide .......no immediate plans to sell, but monitoring closely out of concern.


Yes, this relates to my above post. Some brands don't allow public companies to own dealerships, so ACQ executives have set up separate entities that they own in order to buy the dealerships. Then, the dealerships are rented back to ACQ. So the question is, are ACQ executives looking out for themselves over shareholders?


----------



## OptsyEagle

CPA Candidate said:


> So the question is, are ACQ executives looking out for themselves over shareholders?


and if you had to guess, which answer would you go with.


----------



## CPA Candidate

SheaButters said:


> RBC upgraded to outperform and put a$92 tag on it
> Still too expensive for me





Ethan said:


> ScotiaBank has a $93 price target as of July 11, 2014. This represents 22.5x their forecasted 12 month earnings from Q3 2015 through Q2 2016.





CPA Candidate said:


> In addition, analysts love stocks like these, they present favorable opinions and hope to the company will issue shares underwritten by their brokerage. There is a very large conflict of interest here. The best thing you can do as an investor is stop listening to analysts recommendations and price targets.


I couldn't resist, a bang up job by the paid-for stock cheerleaders know as "analysts". 

As far as the executives working in their own interests or yours, look to share ownership and hopefully a clean past with respect to ethics.


----------



## HaroldCrump

Scotiabank had a $120 price target on this middle of last year. I remember reading the report.
Their current target is still $93 as of 14th Nov. 2014


----------



## Synergy

I road this stock all the way back to my original purchase price:frown:, granted I bought and sold a few times along the way. I picked up a few shares today (potential trade). Feels like ACQ is getting a bad dose of karma. I wouldn't be surpirsed to see this stock go down to around $30 before things stabilize. This was just a "fun" stock for me but it's still nice to make money!

Where's Doctrine to shed some positive light on this un-loved company! We've got a while to wait until the next earnings release:



> AutoCanada Inc. ("AutoCanada" or the "Company") (TSX:ACQ) will release its financial results for the year ended December 31, 2014 on Thursday, March 19, 2015 after market close. The Company will hold a conference call and webcast to discuss the results on Friday, March 20, 2015 at 9:00am Mountain Time (11:00am Eastern).


http://www.stockhouse.com/news/pres...ll-and-webcast-for-fiscal#HlfST6tyYjuQJKOA.99


----------



## Killer Z

This stock is really taking the brunt of all the talk surrounding oil, Alberta and the Canadian economy. Perhaps unfairly .....my quantitative analysis of the company shows it to be quite strong, however I am assuming that most are speculating these numbers to severely change should economic conditions remain or fall. I also think there are a considerable amount of investors panicking along with the herd.


----------



## Synergy

Killer Z said:


> This stock is really taking the brunt of all the talk surrounding oil, Alberta and the Canadian economy. Perhaps unfairly .....my quantitative analysis of the company shows it to be quite strong, however I am assuming that most are speculating these numbers to severely change should economic conditions remain or fall. I also think there are a considerable amount of investors panicking along with the herd.


The chart is ugly, the trend is down, etc. I'm hoping you're correct. I think a lot of investors are on the sidelines watching. I added a little more today at $31.50.


----------



## Ethan

Shares in ACQ closed on November 6, 2014 at $69.35. The following day ACQ announced Q3 EPS of $0.737, a full 45% higher than Q3 2013. Since then, the share price has dropped more than 53%, despite ACQ adding more dealerships and the following positive news releases:

Canadian auto sales in 2014 were 16% greater than in 2013, including a 16.2% increase in the month of December.

http://business.financialpost.com/2015/01/05/gm-canadas-december-sales-up-13-compared-with-year-ago/

November auto sales in Alberta rose 4.8% over November 2013. I can't find the December Alberta results, but I believe they were in the same range.

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20141212/RBCDAUTOSALES

Using the trailing twelve month (TTM) earnings per share (EPS), ACQ traded for a price/earnings (PE) ratio of 48.45 on June 6, 2014. TTM EPS were $1.87 at the time. Today, TTM EPS has increased 15% to $2.15, but the shares have shed nearly 2/3 from their June 6 high. The PE ratio at times today has been under 15.

My question becomes, what happened to the people who bought shares at 48x earnings? Shouldn't they be happy to be able to buy at 15x earnings today? Who is selling and why?

I'm simply amazed by what is happening in this stock.


----------



## GOB

Dipped my toe in here with some options profits. I'll sell covered calls on it.


----------



## Synergy

Nice little bounce today (11.7%). Crazy volatility in this one...


----------



## Ethan

Synergy said:


> Nice little bounce today (11.7%). Crazy volatility in this one...


Despite today's bounce, shares still closed lower than they did on Thursday. Unbelievable volatility.


----------



## Ethan

Between January 19, 2015 and January 30, 2015 ACQ shares fell 28%. From January 30's low to today's high, ACQ shares gained 27%.

I wonder if any regulators are looking into the volatility of ACQ. These share price swings can't be considered normal.


----------



## GOB

Whoops, I sold a $38 covered call on this thinking it would be safe! I guess I'll take the quick profit on Feb 20 (if still above). 18% in 3 weeks ain't bad.


----------



## Jungle

Not for the faint of heart. Don't know how you guys stomach it with 5000K shares. LOL


----------



## doctrine

Talk about volatile. Up 55% from the low on 30 Jan. The legendary streak of 15 quarters in a row of dividend growth, which saw the dividend grow 525% over 3 years, from 4 cents to 25 cents, is over. The next quarterly dividend will be 25 cents. Interesting reaction this morning, but it is probably as prudent a time to change their policy as any. It will be interesting to see how they handle the dividend policy going forward. They've put in a issuer bid, so my suspicion is they will look to integrate their acquisitions, buy back stock if necessary and grow the capital value of the stock until an opportune time arises in the future to issue shares at accretive levels to acquire more dealerships.


----------



## Synergy

doctrine said:


> Talk about volatile. Up 55% from the low on 30 Jan.


Indeed. I'm glad I picked up a few more shares when it dipped down to $31. I'm also somewhat surprised, I figured the sentiment would have been negative on the dividend news. The issuer bid / potential buy backs likely kept things in the green for th day?


----------



## Ethan

2014 results released today. Highlights include:

-Q4 EPS increased 36.4% yoy
-2014 EPS increased 26.2% yoy
-Cautious tone taken regarding future sales, as they noticed a slowdown in sales starting in the second half of December 2014 through to today

I'm curious to see how the market will react.

http://www.marketwatch.com/story/au...lts-with-262-increase-in-basic-eps-2015-03-19


----------



## fcyloh82

The decline in their retail sales in January and February 2015 is significant - "decreases in retail sales of 17.5%, 10.2%, and 33.3%, for FCA Canada (formerly Chrysler Canada), Japanese, and Korean manufacturers, respectively."

The effect of the lower oil prices, and thus the significant reductions in oil companies' CAPEX is being reflected here.


----------



## GoLong

down 22% on open...ouch


----------



## jamesbe

This always seems to happen. Records sales, drop in stock price.

I could see Jan/Feb sales being slow, but March/April are usually good months and with low oil SUV/Truck sales are through the roof. Interesting.


----------



## leeder

It isn't necessarily the performance that made this stock drop, rather their negative outlook and sales to date. 
http://www.financialpost.com/m/wp/n...depletes-buyers-confidence&pubdate=2015-03-20


----------



## CPA Candidate

Do you think any of the analysts (aka investment bank business salesmen) that had target prices of $90+ are going get called out?

Nope, and the market will hang on their every word even though they suck.


----------



## jamesbe

IMO it's over reaction to the outlook. It did hit $90 at one point.

Should it get there again? Who knows, but I think we will see a quick upside again.


----------



## GoLong

CPA Candidate said:


> Do you think any of the analysts (aka investment bank business salesmen) that had target prices of $90+ are going get called out?
> 
> Nope, and the market will hang on their every word even though they suck.


It would be hard to call an analyst out for not predicting the plunge in oil prices, especially given the fact not even top economists did. Think it would be more interesting to see which analysts didn't even do enough DD to list decline in oil prices as a risk to the company given the geographic breakdown of ACQ. When oil was at $90+ it would be hard to argue it wasn't deserving of those TP's given the growth outlook. That's just my opinion though


----------



## Ethan

leeder said:


> It isn't necessarily the performance that made this stock drop, rather their negative outlook and sales to date.
> http://www.financialpost.com/m/wp/n...depletes-buyers-confidence&pubdate=2015-03-20


I thought that would have already been priced in given the 50% drop in share price from last June.


----------



## leeder

Ethan said:


> I thought that would have already been priced in given the 50% drop in share price from last June.


Obviously we're still overly optimistic.


----------



## Synergy

I'm hoping to buy more on Monday if it gets closer to $30.


----------



## daddybigbucks

I took a look at this as its getting into 52 week lows.
Their current liabilities are 636M.
And they only have 72M in Cash.

Interest rates are low but not sure if many banks are taking on a lot of long term loans.

I will wait and see if they can convert the short term debt to long term before buying in.
Thinking that the dividend should be halted.


----------



## peterk

bought some more Friday at $34. Oops.


----------



## Ethan

daddybigbucks said:


> I took a look at this as its getting into 52 week lows.
> Their current liabilities are 636M.
> And they only have 72M in Cash.
> 
> Interest rates are low but not sure if many banks are taking on a lot of long term loans.
> 
> I will wait and see if they can convert the short term debt to long term before buying in.
> Thinking that the dividend should be halted.


Let's analyse their current liabilities to see if they are adequately funded.

Of ACQ's $636 million in current liabilities, $528 million were floor plan facilities, covered by $563 million in inventory. It is common in the auto-retailing industry to cover nearly 100% of your inventory with floor plan facilities. ACQ's agreements with various banks and manufacturers allow for their floor plan facilities to reach ~$843 million; ACQ could increase their floor plan facilities by $280 million. I have no concerns here.

Of the remaining $108 million of current liabilities, $83 million is accounts payable, covered by $92 million of trade receivables. I have no concerns here.

That leaves $25 million of current liabilities. $12 million is the current portion of long-term debt and $9 million are taxes owing, neither of these would typically be converted to long-term debt. And why would they, considering they had $72 million of cash at 12/31/2014 and are still turning profits? If you're waiting for ACQ to convert their current liabilities into long-term before buying in, I suspect you'll never buy in.

As far as their long-term financing goes, they have a $200,000,000 revolving facility from which they have drawn $37 million. Funds drawn from this may be used for basically anything (general corporate purposes per note 26 vii). $163 million can buy a whole lot of dealerships.

Why would you recommend halting the dividend? At $0.25/quarter with 24.4 million shares outstanding as of 12/31/2014, the dividend is $24.4 million/year. Compared to 2014 net income attributable to shareholders of $53.1 million the payout ratio is 46%. The undrawn amount on their revolving facility alone can fund nearly 7 years of dividend payments.


----------



## daddybigbucks

"It is common in the auto-retailing industry to cover nearly 100% of your inventory with floor plan facilities."

A quick look on the web of knowledge shows "65% of the net book value of vehicle inventory" is equal to a floor plan facilities.

I'm not going to argue with you as I have my book value and you have yours. 

im looking for companies that can weather the current storm with little risk.

but I got to thank you for the floor plan value, that's something I just learned.


----------



## Ethan

daddybigbucks said:


> "It is common in the auto-retailing industry to cover nearly 100% of your inventory with floor plan facilities."
> 
> A quick look on the web of knowledge shows "65% of the net book value of vehicle inventory" is equal to a floor plan facilities.


Here's how some of the other publicly traded auto retailers are financing their inventory.

Penske Automotive Group has $2.819 billion in inventory against floor plan facilities of $2.733 billion. Their floor plan facilities are equal to 97% of the net book value of inventory.

http://investors.penskeautomotive.com/phoenix.zhtml?c=82644&p=irol-reportsannual

Group 1 Automotive has $1.542 billion in inventory against floor plan facilities of $1.433 million. Their floor plan facilities are equal to 93% of the net book value of inventory.

http://group1corp.com/index.php?s=120&cat=18

Auto Nation has $2.827 billion in inventory against floor plan facilities of $3.029 billion. Their floor plan facilities are equal to 107% of the net book value of inventory.

http://investors.autonation.com/phoenix.zhtml?c=85803&p=irol-reportsannual

Asbury Automotive has $886 million in inventory against floor plan facilities of $766 million in floor plan facilities. Their floor plan facilities are equal to 86% of the net book value of inventory.

http://www.asburyauto.com/investorrelations.html



> I'm not going to argue with you as I have my book value and you have yours.


I didn't know book value is up for interpretation. I look at ACQ's balance sheet to determine their book value ($381 million attributable to ACQ common shareholders at 12/31/2014), what do you look at?


----------



## Synergy

I had a low ball offer that never got filled today. I'll try my luck over the next few days. I've also been picking away at the energy sector.


----------



## daddybigbucks

Ethan said:


> Here's how some of the other publicly traded auto retailers are financing their inventory.


I did look at those and Group 1's balance sheet is almost identical to ACQ. The big difference is that it is in the States. The States has been on a 5 year Bull run.
One thing I have found is that when big money is flowing, common sense goes out the window. Which I think is why ACQ is falling right now because common sense is coming back into the picture.



Ethan said:


> I didn't know book value is up for interpretation. I look at ACQ's balance sheet to determine their book value ($381 million attributable to ACQ common shareholders at 12/31/2014), what do you look at?


I don't understand how book value* can't* be up for interpretation. If book value was static then the stock market would be as well.
I do have a simplistic way of determining book value that I use for miners, energy etc. It seems my matrix wont work for ACQ because I get a negative book value because they haven't the liquidity that I like to see.
Thanks again for the info and I will continue to watch ACQ from the sidelines and see where it bottoms out and use that as a guideline for worst case book value for dealerships.


----------



## Ethan

daddybigbucks said:


> I don't understand how book value* can't* be up for interpretation. If book value was static then the stock market would be as well.


I don't think you understand the difference between book value and fair value. Book value is quite literally the amount an asset is carried at on the books. The amount on the balance sheet is the book value and can't possibly be debated. Since I know you don't trust me, here is the definition from investopedia:

_Book Value literally means the value of the business according to its "books" or financial statements. In this case, book value is calculated from the balance sheet, and it is the difference between a company's total assets and total liabilities. Note that this is also the term for shareholders' equity._

http://www.investopedia.com/articles/investing/110613/market-value-versus-book-value.asp

Fair value is an estimate of what a good, service or asset can be sold for. Here is the Wikipedia definition:

_Fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset._

http://en.wikipedia.org/wiki/Fair_value



> I do have a simplistic way of determining book value that I use for miners, energy etc. It seems my matrix wont work for ACQ because I get a negative book value because they haven't the liquidity that I like to see.


I don't know how a company with $400 million in additional borrowing capacity, $380 million in book value, $100 million in working capital and $50 million in earnings could have negative book value, negative fair value or liquidity concerns.

If you are determining liquidity by comparing cash to current liabilities (as you did in post #488), I am curious who you invest in. I had a look at some of the large non-financial companies in Canada to see if anyone could cover their current liabilities with cash.

CN Rail - $515 million in cash + cash equivalents against $2,201 million in current liabilities
Bell - $566 million in cash + cash equivalents against $9,089 million in current liabilities
Canadian Tire - $662 million in cash + cash equivalents against $4,579 million in current liabilities
TransCanada - $489 million in cash + cash equivalents against $7,584 million in current liabilities
PotashCorp - $215 million in cash + cash equivalents against $2,198 million in current liabilities
Suncor - $5,495 million in cash + cash equivalents against $8,354 million in current liabilities

AutoCanada's cash/current liabilities are better than most of those companies listed. Would you suggest any of the above companies don't have sufficient liquidity and need to convert current liabilities to long-term as well? Of course not. It's silly to compare cash to current liabilities, it tells you nothing in regards to a company's liquidity. Working capital (current assets less current liabilities) is far more relevant.


----------



## daddybigbucks

your black or white kinda guy eh?

ive found it fruitless discussing anything gray with people like that.

good luck


----------



## Flash

So is ACQ owning any Japanese dealership? A post from Globe and Mail said that "major manufacturers Honda, Ford and Toyota would not allow publicly traded companies such as AutoCanada to own dealerships".
Yet I am seeing some reports saying that ACQ's owned dealership sales fell in Alberta, including Japanese ones.


----------



## Ethan

daddybigbucks said:


> your black or white kinda guy eh?
> 
> ive found it fruitless discussing anything gray with people like that.
> 
> good luck


If by gray you mean changing the definition of terms, such as book value, then I'm a black or white kind of guy.


----------



## Ethan

Flash said:


> So is ACQ owning any Japanese dealership? A post from Globe and Mail said that "major manufacturers Honda, Ford and Toyota would not allow publicly traded companies such as AutoCanada to own dealerships".
> Yet I am seeing some reports saying that ACQ's owned dealership sales fell in Alberta, including Japanese ones.


ACQ owns dealerships who carry the following brands:

Volkswagen
Chrysler/Jeep/Dodge/FIAT
Hyundai
Nissan
Mitsubishi
Infiniti
Kia
Subaru
Audi

They have made investments (usually 80% of common shares with no voting rights) in the following brands:

Chevrolet/GMC/Buick
BMW/Mini


----------



## CPA Candidate

Ethan said:


> If by gray you mean changing the definition of terms, such as book value, then I'm a black or white kind of guy.


Don't bother arguing with a layman.


----------



## GoLong

I've always followed the stock but never been all that interested in it. It's concerning to me that the numbers already show declining sales and margins being squeezed already (in what is already a low margin business). Their plan to acquire more dealerships in places like Alberta when they can get them at a discount seems a bit too risky for my liking, I'd rather they take the time to realize their lack of diversification and continue to expand into places like Ontario like they had begun to do. What do you guys think about their M&A plans?


----------



## Synergy

I thought this was a decent overview of ACQ despite omitted some of the current risks, outlook, etc.

http://www.fool.ca/2015/03/23/does-...a-inc-s-stock-represent-a-buying-opportunity/


----------



## humble_pie

oh dear, i'm disappointed that anyone would call this "decent" coverage.

the fool dot ca "article" is not any kind of reasonable, balanced overview. It's a blatantly paid pump by a hack writer. It's nothing but a list of shallow, somewhat simple-minded reasons to buy ACQ.

unlike many worthwhile messages posted here in cmf forum re ACQ, there isn't even a decent attempt to probe the negatives that have caused the stock to plunge by 50%. Instead, the pumpster brands parties who don't embrace his puff piece as "foolish."

as is typical with fool dot ca, the "article" concludes with the trademark sales pitch demanding $$ to buy another piece of sugar coating.

one might take a look at writer joseph solitro's history. His previous articles. It appears he can be hired to pump anything, anything at all.

seeking alpha is another crowd-sourced pump-$-dump wringer washer. Although some writers are true volunteer amateurs writing independently, some are hack writers who are paid to regurgitate pablum.

a fact that continues to surprise & delight me is that, among the senior posters on cmf forum, there are still so very few paid pumpsters. There have been none in the history of the ACQ thread, imho.

might i add that it's my understanding that the companies themselves who are the objects of pump campaigns are often not even involved. The campaigns are orchestrated by shadowy pink sheet type professionals. A typical strategy is to acquire an inventory of warrants, then promote the bejesus out of a failing stock or a penny issue.

once, when interviewing a tsx investigator whose mandate was fraud prevention, i asked why so many thousands of stock pumps proliferate in the internet, since the activity is, after all, an illegal criminal action?

he replied that not only do securities authorities lack the manpower necessary to prosecute the ever-increasing hordes of internet stock pumps, but also the authorities believe that the victims of pump campaigns are complicit in their own downfall. "It's not difficult to resist an anonymous internet stock pitch," he said. "Anyone can check further."


----------



## Synergy

Did I not say "despite" omitted information? Sorry to disappoint. Anyway, I could care less about the article itself. I simply appreciated the data summary. I do however agree with you and as per my original post they should have provided more information with regards to current risks, negative outlook going forward, etc.


----------



## humble_pie

^^

of course you included a warning that a great deal of balanced information was missing! like i say, there have never been any cmf pumps on this interesting & controversial company. Not once, not ever.

but fool dot ca is a frequent violator. Recently some folks have begun linking to fool as if it were a serious research resource, so here & there i've begun speaking out against fool. It just so happened that the present instance was about ACQ.

here is our friend monsieur solitro ending his ACQ sales pitch in classic pumpsterese. The snake oil promotional language is the giveaway.

_"With all of this information in mind, I think AutoCanada represents one of the best long-term investment opportunities in the market today. Foolish investors should take a closer look and strongly consider establishing positions."_


----------



## Synergy

Agreed. It would be foolish to rely on a fool! I think I posted that one before. It's a very noble thing you're doing, a lot of people are easily manipulated by articles telling only half the story. With time you learn to trust know one, cross reference multiple sources of information and review company's financials directly from the source. I do however enjoy reading articles from the fool, seeking alpha, etc. but I always take their recommendations with a grain of salt.


----------



## marina628

Many of us bought this in 2011 when it was under $10 a share and made alot of money on it but for me the signal not to get back in was when the CEO sold off a bunch of stock ,now just watching from the side lines .I personally was not surprised to see this free fall from $91 to present value .


----------



## Killer Z

Added to my ACQ position yesterday at $31.88/share. My attempt to play the "Alberta oil collapse is overdone" theme without directly investing in energy stocks. We will see how it shakes out in a year or two.

_"When there is blood in the streets ......"_


----------



## cdnceo

ACQ starts moving up again this week.

Acquired Airdrie Chrysler. ~30km north of Calgary.

ACQ now owns/reps 48 dealerships.

Mgmt guidance is to acquire 2-4 additional dealerships by May.

Q1 earnings on May 7.


----------



## Synergy

On the move again this morning. What a ride!


----------



## cdnceo

Synergy said:


> On the move again this morning. What a ride!


National Bank initiated coverage @ outperform / $45 PT


----------



## fstamand

Quite bullish today. Anyone got in on the 17%+ spike ?


----------



## peterk

Still holding my 90 shares... still underwater...


----------



## Synergy

I've stuck with it and picked away when it was in the low 30's. It's been a ride!


----------



## thepitchedlink

trying to decide right now if I should stay in the a bit more of a ride or take some profits...up 16% now....fun


----------



## doctrine

I think that's the biggest one-day jump in the stock since I've owned it (3.5 years). I think a lot of shorts getting squeezed by the positive (but not over-exuberant) outlook.


----------



## Killer Z

According to the ticker on BNN:

"AutoCanada to announce two acquisitions within 45 days"

Perhaps this was the catalyst to today's spike.


----------



## GoldStone

"The mother of all short squeezes" is the technical term for today's action.


----------



## thepitchedlink

Hhhmmm, new low today , time to get back in???,


----------



## CPA Candidate

thepitchedlink said:


> Hhhmmm, new low today , time to get back in???,


It's interesting for sure. Similar to other names, the market has a hate-on for it at the moment.


----------



## jaybee

Couldn't help myself. When it dipped below 30.00 I pulled the trigger.


----------



## Synergy

jaybee said:


> Couldn't help myself. When it dipped below 30.00 I pulled the trigger.


Same here, I picked up a few more shares @ $30.00.


----------



## jaybee

Did they release their quarterly results after hours? Can't find them anywhere.


----------



## CPA Candidate

jaybee said:


> Did they release their quarterly results after hours? Can't find them anywhere.


I found them on the ACQ website. Earned 56 cents/share in Q2 compared to 59 cents last year. Business is off, but not badly. Analyst estimates were 51 cents. That's two beats in a row.

Data in the report indicated new cars sales in AB were off 8% from last year. There's your Western economic catastrophe.


----------



## Synergy

"Two beats in a row", let's see if this is enough to keep Mr. Market happy...


----------



## jaybee

All things considered it was a pretty good quarter. It's encouraging that they've had two beats in a row.

Increased vehicle sales in Ontario, Quebec, PEI, NB and BC somewhat offset the decline in Alberta and Saskatchewan. Manitoba, NS, and NL were down slightly, but basically flat. In a business such as this, it's encouraging to see nice jump in overall gross profits even though same store revenue is off a bit.

It will be interesting to watch this stock over the next few days. This is a good business that I'm prepared to hold for the long run.


----------



## jaybee

Synergy said:


> "Two beats in a row", let's see if this is enough to keep Mr. Market happy...


Well Mr Market is happy this morning. Up 7.65% 5 minutes into trading.


----------



## CPA Candidate

I expected a little more pop, but a decent response. These days the market doesn't let actual performance get in the way of sentiment.


----------



## Synergy

CPA Candidate said:


> I expected a little more pop, but a decent response. These days the market doesn't let actual performance get in the way of sentiment.


So much for the pop!


----------



## Ethan

On August 7, 2014 ACQ announced Q2 2014 earnings of $0.59/share. The following day the shares closed at $70.60.

On August 6, 2015 ACQ announced Q2 2015 earnings of $0.56/share. The following day the shares close at $31.59.

For the last year there has been no point in following the financial performance of the company as it has no bearing on the stock price. The stock movement is more closely correlated with the price of oil than anything actually going on at the company.


----------



## blin10

tipping my toes at this price


----------



## CPA Candidate

One thing I noticed when taking a closer look at the financials was they are right up against some the debt covenant limits. The adjusted total leverage ratio limit is 4.50 and they were at 4.49. A note said that the limit could be raised to 4.75 for two consecutive quarters.

The syndicated floor plan required a minimum current ratio of 1.10 and the company was at 1.14.


----------



## Killer Z

At 3.68% this one has all of a sudden become a decent dividend paying stock. Added to my position this morning.


----------



## thepitchedlink

watching, might add a bit more here....wish I had some more room in the ol' TFSA


----------



## CPA Candidate

CPA Candidate said:


> One thing I noticed when taking a closer look at the financials was they are right up against some the debt covenant limits. The adjusted total leverage ratio limit is 4.50 and they were at 4.49. A note said that the limit could be raised to 4.75 for two consecutive quarters.
> 
> The syndicated floor plan required a minimum current ratio of 1.10 and the company was at 1.14.


And they just issued 75 million in equity because of this, at a slightly lower price than the last issue.


----------



## Ethan

CPA Candidate said:


> And they just issued 75 million in equity because of this, at a slightly lower price than the last issue.


The ratios you commented on were from Q2. Their ratios improved in Q3, plus their covenants were changed to ACQ's benefit during the quarter (most notably the adjusted total leverage ratio limit increased from 4.50 to 5.00). I think the recent equity issue is mostly about giving them more cash to buy more dealerships.

I'm not sure how management can justify issuing shares at $25 just 17 months after they issued shares at $78. It seems like they'll issue shares once/year regardless of the share price. I'm not a fan of this.


----------



## Ethan

The other thing I don't understand about the equity issuance is how it relates to the normal course issuer bid. On February 17, after the shares closed at $48.24, ACQ announced they were going to buy back up to 490,000 shares over the following year. Considering they had just issued shares for $30 more 7 months prior, this seemed like a prudent move. So why now are they issuing shares for half the price they were willing to buy them back for?

Further confusing is how they've issued equity in 3 straight years after raising the dividend for (14?) consecutive quarters between 2011 and 2024. Do they need cash or not? In the past 2 years they've raised the dividend 4 times, raised equity twice and received permission to buy back 2% of their shares. What is one to make of these conflicting actions?

AutoCanada seems more interested in raising cash regardless the cost instead of following any sensible kind of capital management.


----------



## CPA Candidate

Their comment was that the equity raise was to reduce indebtedness on their credit lines, which may be redrawn in the future for acquisitions, but is not intended for anything specific. The justification is that they need to strengthen the balance sheet, in my opinion.

Ethan, you raise some good points. There have been some confused signals and actions coming from the company.


----------



## CPA Candidate

Currently valued like they are going out of business. Very near book value if not below with the recently equity issue.

Never been a huge fan of the company, but there is some value here for sure.


----------



## blin10

CPA Candidate said:


> Currently valued like they are going out of business. Very near book value if not below with the recently equity issue.
> 
> Never been a huge fan of the company, but there is some value here for sure.


yea I agree, slowly adding


----------



## Killer Z

Obviously auto industry sales have slowed, but this slide is incredible. Essentially down 15% in the past 5 days and almost 30% in the past month.


----------



## Ethan

Killer Z said:


> *Obviously auto industry sales have slowed*, but this slide is incredible. Essentially down 15% in the past 5 days and almost 30% in the past month.


Canadian auto sales jump almost 10% in January

http://business.financialpost.com/news/canadian-auto-sales-jump-almost-10-in-january


----------



## CPA Candidate

There was an article in the G&M yesterday talking about how ACQ is "too cheap to be ignored". That's exactly what I said! Even Veritas Investment thinks it's a buy.


----------



## thepitchedlink

Bought in again here @ 18.46


----------



## besmartrich

I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are four factors that scare me at this time.

1) its recent equity at really low price,
2) its really high debt ratio
3) its very thin margin
4) its not very attractive cash flow.

Maybe all I mentioned are expected in this fast growing company. I am not too familiar with the industry. Can anyone shed some lights on this one as to why it is an attractive buy for me?


----------



## Pluto

besmartrich said:


> I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are five factors that scare me at this time.
> 
> 1) its recent equity at really low price,
> 2) its really high debt ratio
> 3) its very thin margin
> 4) its not very attractive cash flow.
> 
> Maybe all I mentioned are expected in this fast growing company. I am not too familiar with the industry. Can anyone shed some lights on this one as to why it is an attractive buy for me?


Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down. 

I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.


----------



## besmartrich

Pluto said:


> Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.
> 
> I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.


I understand now. Learned another lesson here. Pluto, probably I shouldn't ask under AutoCanada section but what investments do you have, what investments are you interested in lately and why?


----------



## Ethan

besmartrich said:


> I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are four factors that scare me at this time.


I'm not sure I follow your concerns.



> 1) its recent equity at really low price,


The equity issue was announced in Q4 at $25.50/share. The shares are currently trading at $18.50/share. If you consider the equity issue to be a low price, what would you consider the current price? Wouldn't you like to buy shares at 28% below a low price?



> 2) its really high debt ratio


Which debt ratio are you referring to? What would be a preferrable level? Have you factored in the $75 million increase in assets (with no corresponding increase in liabilities) from their Q4 equity raise?



> 3) its very thin margin


Gross margins are 16.3% so far in 2016. What level of margin would you be comfortable with?



> 4) its not very attractive cash flow.


Their 12 month trailing free cash flow is $69 million. How much free cash flow do you expect them to generate?


----------



## CPA Candidate

Pluto said:


> Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.
> 
> I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.


GM's guidance for 2016 was recently raised, along with the dividend and the buyback program. 

I think their is a disconnect between what the market is anticipating and what is happening. It's a mistake to see equity prices as some sort of crystal ball. The market has predicted 27 of 11 recessions.


----------



## blin10

Pluto said:


> Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.
> 
> I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. *One is better off to wait for a clear bottom and upward momentum before attempting a trade.*


how will you know that it's a clear bottom ? when stock goes back to $40?


----------



## Killer Z

Q1 results are out:

http://www.stockhouse.com/news/pres...anada-inc-announces-q1-2016-quarterly-results

They slashed their dividend by 60% ($0.25 to $0.10), however their numbers appear promising causing the share price to pop this morning. Up over 15%!


----------



## hollyhunter

From the relationship between price and moving averages; we can see that: This stock is BULLISH in short-term; and NEUTRAL in mid-long term. Looking for a breakout at 22.42 with a short term target of 26.19.


----------



## Kropew

2016 second quarter results: http://www.newswire.ca/news-release...erly-earnings-per-share-of-053-589243821.html


----------



## hollyhunter

ACQ.TO has been showing support at 21.57 and resistance at 23.31. From the relationship between price and moving averages; we can see that: This stock is BULLISH in short-term; and BULLISH in mid-long term.


----------



## Kropew

Q3 2016 http://www.reuters.com/article/idUSASC09G9Q


----------



## Kropew

up 7% today, anyone know if there's a particular reason for this rise?


----------



## Kropew

http://www.bnn.ca/video/~1013177 
1:47
"Bill Harris, partner and portfolio manager at Avenue Investment Management joins BNN to discuss the bullish case for AutoCanada."


----------



## james4beach

No discussion on this stock for a while. It was hotly discussed as it was rocketing higher a few years ago but it's done quite poorly since then. Currently down 85% from its peak price in 2014.

Curious what people think? I'll offer a quick observation from technical analysis. It's generally a bad sign when a stock fails to stay above its 200 day moving average, so I'm seeing bearish price action. Here's a chart: http://schrts.co/IknfxvTj


----------



## peterk

james4beach said:


> I'll offer a quick observation from technical analysis. It's generally a bad sign when a stock fails to stay above its 200 day moving average, so I'm seeing bearish price action. Here's a chart: http://schrts.co/IknfxvTj


Hey James, I don't know anything about technical analysis... but isn't the 200 day moving average like * the* thing that's been around forever and quoted by stock market followers as a potentially good indicator of stocks? How could this possibly hold any relevance in today's world of advanced computerized trading and an army of 100,000 150+ IQ genius quants in New York trying to take our money 24/7? Surely the effectiveness of the 200 day moving average went out with the sliderule and graphing stocks with pencils on grid paper, no?

Also, I wish I never heard of this cursed ACQ! My ACB is in the high 20s and I thought I was getting a good deal at the time...


----------



## OptsyEagle

They seem to have mismanaged the business quite well. Also, I think the auto cycle is probably started its slow decline. The good news with ACQ, is that they also have the repair business that should keep the cash flow going, even in bad times, but I am not sure it alone would keep the stock price above $11. It should keep it from bankruptcy and it should support the dividend. 

The US acquisition was probably a bad idea, like almost all US acquisitions are. That said, Auto dealerships are kind of a legalized crime story, if you ask me. As long as people keep coming in for cars, they are allowed to rob and steal from them, without recourse. Many people give them access to their wallets, a lot more frequently now then in the older days, so I have no doubt this company will trade higher at some point, but that day may not be in 2019. Slower auto sales will provide for cheaper dealership acquisitions in the future, and they are pretty cheap and abundant even now.

Not sure what to recommend here, so everyone is on their own. Good luck.


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## doctrine

I made close to a 10 bagger on this stock. However, that was with Pat Priestner at the helm and the company was performing extremely well. Unfortunately, that is no longer the case. Sometimes I come back to a stock a few years later if the price falls and fundamentals haven't changed, but they look changed to me. The dealerships they have acquired are not performing well, especially in the US. The company is losing money on an adjusted basis. With dealerships spread out all over the place in both countries, it is difficult to see a path back to success. Pat Priestner will probably pick up some of these dealerships at 50 cents on the dollar when they are eventually sold and turn them around on his own.


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## l1quidfinance

I check back on this one once in a while. Just because at one stage it was such a hot story here. I felt like I was missing out and really wanted to get in on the action. 

For this I just decided to sit on the sidelines. There is no moat to this industry. Barely a barrier to entry so I failed to see how it could continue to clime. 
When I see auto sites advertising 8 year finance terms it worries me so I wonder about the state of the industry. Let alone it appeared to simply be a story of growth by aquisition. Too much too quickly never seems to end especially well. You see dealers everywhere so whats the competitive advantage?

For those reasons the story to me was too good to be true and now with the fears of an economic slow down the last thing people will be doing imo is taking on more debt to buy newer vehicles.


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## OptsyEagle

l1quidfinance said:


> I check back on this one once in a while. Just because at one stage it was such a hot story here. I felt like I was missing out and really wanted to get in on the action.
> 
> For this I just decided to sit on the sidelines. There is no moat to this industry. Barely a barrier to entry so I failed to see how it could continue to clime.
> When I see auto sites advertising 8 year finance terms it worries me so I wonder about the state of the industry. Let alone it appeared to simply be a story of growth by aquisition. Too much too quickly never seems to end especially well. You see dealers everywhere so whats the competitive advantage?
> 
> For those reasons the story to me was too good to be true and now with the fears of an economic slow down the last thing people will be doing imo is taking on more debt to buy newer vehicles.



Excellent points. One needs to remember, however, that cars do not last forever and to keep them lasting a long time they need to be repaired. None of that is exclusive to ACQ but they are certainly not excluded from it either.

Everything comes down to what is it all worth. I doubt you will buy it today and be glad you did in 6 months, but with that said, if one waits to buy it, what will you need to see to buy it and when you see it, at what share price will you be required to pay. It's a much better deal today at $11 then it was at $96, but I actually got to buy some during the credit crises in the $3 range, so what does any of that say. Not much.

Good luck is about all one can say. I think we and the entire market understands where this one sits and it has probably been appropriately priced...at least until Monday. lol.


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## Spudd

I bought this one 7 months ago because it had low P/B and P/S ratios, and was making money. So far I'm up 15%, so it's working out so far. My method says not to buy anything that lost money in the past quarter, so it would not be a buy for me today, given their disastrous last quarter. I am holding them for now and we'll see what happens.


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## OptsyEagle

Not sure if anyone noticed this:

https://web.tmxmoney.com/article.php?newsid=8359178124672409&qm_symbol=ACQ

Above and beyond ACQs business value they also own some of the most valuable real estate locations in some of our largest city centres. They just sold 2 properties to AutoReit for $24 million dollars. I think at last count they own 61 dealerships.

Not bad for a company the market values at less then $300 million...oh yeah, and they also sell cars and repair them as well.


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## hboy54

OptsyEagle said:


> Not sure if anyone noticed this:
> 
> https://web.tmxmoney.com/article.php?newsid=8359178124672409&qm_symbol=ACQ
> 
> Above and beyond ACQs business value they also own some of the most valuable real estate locations in some of our largest city centres. They just sold 2 properties to AutoReit for $24 million dollars. I think at last count they own 61 dealerships.
> 
> Not bad for a company the market values at less then $300 million...oh yeah, and they also sell cars and repair them as well.


Interesting. This trades at price to sales of 0.1. Even the most hated company in Canada BBD.B trades at 0.3.


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## OptsyEagle

I am surprised that someone has not thought about taking a car dealership property, that is sitting in the middle of a large city, where real estate prices are soaring, and simply build condos or office buildings above it.

I mean, as long as the auto dealership promises to turn off that annoying paging speaker system that blasts way too loudly throughout the parking lot, I am sure people would not care that they live above them. Just make the ground floor the auto dealership and now the entire parking lot is a showroom. No snow to shovel off the cars, or rain to keep customers away. The rain would just keep the customers away from your competitors parking lot, that did not have a huge condo complex above them.

Anyway, someday they will think of it, but in Toronto and Vancouver, where housing supply is constrained, why don't they do this type of thing? I mean these properties are huge.


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## doctrine

hboy54 said:


> Interesting. This trades at price to sales of 0.1. Even the most hated company in Canada BBD.B trades at 0.3.


It doesn't matter if it trades at a price to sales ratio of 0.01 if they are structurally losing money. It may actually be a sign the company is in danger of recapitalization. They bought a lot of dealerships and haven't figured out how to generate a (good/any) return on capital. On a turnaround, ACQ could absolutely explode, similar to other acquisition-based retail store companies like Boyd or a ATD.B. But...no turnaround in sight yet. 

They have a lot of good real estate, but they've already sold off 8 of them, and it hasn't helped yet. They must turn around operations at existing dealerships, especially in the US, if the stock is to do well.


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## hboy54

doctrine said:


> It doesn't matter if it trades at a price to sales ratio of 0.01 if they are structurally losing money. It may actually be a sign the company is in danger of recapitalization. They bought a lot of dealerships and haven't figured out how to generate a (good/any) return on capital. On a turnaround, ACQ could absolutely explode, similar to other acquisition-based retail store companies like Boyd or a ATD.B. But...no turnaround in sight yet.
> 
> They have a lot of good real estate, but they've already sold off 8 of them, and it hasn't helped yet. They must turn around operations at existing dealerships, especially in the US, if the stock is to do well.


Sure, but P/S of 0.1 + brains often equals exceptional return 5 years out. See BBD.B, OSB for recent examples. I have a full plate with my investing activities now so not personally investigating, but I stand by "interesting".


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## OptsyEagle

hboy54 said:


> Sure, but P/S of 0.1 + brains often equals exceptional return 5 years out. See BBD.B, OSB for recent examples. I have a full plate with my investing activities now so not personally investigating, but I stand by "interesting".


That is exactly it. There is a big difference in the opportunity between a company that is currently losing money that trades at 0.1 x sales and another company that is losing money that trades at 10 x sales. The risks in the two are about the same but the rewards are considerably different.

Obviously if it continues to lose money, it will most likely turn into a bad investment. No one should debate that reality. I hope no one debates that once it proves it is not going to lose money, the stock will be trading at a lot higher price then it is today. So the question really is, can ACQ turn things around? To benefit, one needs to answer this question before it actually happens, since the stock will begin to rise long before we see its recovery, as all stocks do in these situations.

I don't see any fundamental reason why ACQ dealerships are somehow more uncompetitive then any other dealership. Most dealerships are literally a license to steal money, so I suspect that they had a senior management group running things on autopilot, and the business got away from itself. A more capable management group should be able to change that but it will not happen in one quarter. In the mean time, one can be pretty sure bankruptcy is not in the cards, because it appears that the land value of the dealerships is worth more then the debt they owe. Bankruptcy only comes to those who cannot pay off their debt. So we now know they will most likely have the time to recover. Their business is not going away. Even for the idiots that think cars can be bought online, they could do that more effectively then others and sell their dealerships to Condo developers if that ever became a reality, which I doubt. So they will get the time to recover. Investors will get the dividend while they wait and when the recovery happens, the only question arises is what Price to Sales should the stock trade at now that it is making money. 

We are not talking about 10% or 20% or even 50% gains. The new share price number, most definitely, will be a few multiples higher at least, then 0.1x, which means we are actually talking about 100%, 200% or even 500% gains. As Hboy said, even if it takes 5 years, those are outstanding returns...plus you get a dividend while you wait.


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## KaeJS

I think Optsy has it nailed down.

Personally, I see tremendous value here. The largest worry of course is that for the last two quarters, they have posted a loss. Is that good? Obviously not. But if you take a look at the revenue generated, it's not as if the revenue is falling hard. In fact, even though they lost money in the last two quarters, they beat revenue expectations for both those quarters. Revenue appears to be steady, at least. It is not in decline.

So what does this mean? Debt. Borrowing. Expenses of some or all kinds are contributing to losses on the bottom line.

But let's face it - it has a huge chance of recovery. The stock price could still decline into single digits if they keep posting losses, but like Optsy said... The FV on this stock could easily be over 100% from current price.

They've taken on more than they can handle. But that's not always a bad thing. I would bet they can turn it around.

Lastly, the auto industry and being cyclical and yadda yadda... I don't even factor that into my purchasing. Why? Because that affects everyone. It's not related to ACQ as an individual issue.

You'd almost be foolish to not consider purchasing a company making the same revenue they did when they were $80+ and are now only $10.

Yes, there are issues. But if those issues get solved? Boom.


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## OptsyEagle

AutoCanada did it again. This time they sold the land under 3 dealerships to Automotive Properties REIT for $30.4 Million dollars. You may recall back in April they did the same thing, but the price was $24 million for 2 dealerships. The point here is that AutoCanada owns 66 dealerships. If you assume they could sell this real estate for $10 million per dealership, that adds over $600 million dollars to their valuation. 

Currently the stock market thinks this company is only worth $300 million. Even when you add $300 million of debt you can't help but notice that the stock market has valued their Auto Sales business, their Auto Repair business and their Auto Finance business at about $0 value, and as I said they own 66 of them.

https://web.tmxmoney.com/article.php?newsid=7256457793394539&qm_symbol=ACQ

It appears investors are slowly tripping on to this abnormality, but I am surprised how slow sophisticated investors can be.


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## fireseeker

OptsyEagle said:


> If you assume they could sell this real estate for $10 million per dealership, that adds over $600 million dollars to their valuation.


I have not examined the company, but this seems like a huge assumption. If in need of ready cash, might ACQ be selling its best real estate first?
The news release does not say where the dealerships were located. But I would not expect land in, say, Timmins to be as valuable as land in Mississauga.


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## OptsyEagle

fireseeker said:


> I have not examined the company, but this seems like a huge assumption. If in need of ready cash, might ACQ be selling its best real estate first?
> The news release does not say where the dealerships were located. But I would not expect land in, say, Timmins to be as valuable as land in Mississauga.


By no means are my numbers offered with any level of precision. They might even rent a few already, who knows, although I doubt it, except the 2 they sold in April. If we were adding $100 million to their value, much more precision would be required, but we are adding some number in the $500M to $600M level. I am sure you have driven through enough cities to see the size of these dealerships and for many, the sweetness of their locations. It is certainly more then a few million each, in any case. It's enough land to build multiple condo's, shopping malls, office buildings and still park most those people's cars.

Personally I think their current dealership business is worth a large amount more then the $12 per share the stock market is asking today and in fact, it is this real estate that is being thrown in for free. I suspect most are owned by ACQ because entities like Automotive REIT just did not exist when most of these dealerships were formed, and I suspect other real estate investors would have shied away from managing this type of property.

Anyway, it seems that investors are starting to become aware of this but understand that it will inevitably be the auto business performance that will move the stock. Currently investors are concerned about the point in cycle we are in, with respect to auto sales, hence why the jump in price on these announcements, tends to fizzle out a few days later . I don't disagree with them, but know that the repair business is their to cushion a down cycle in auto's, and cars just don't last forever. This buying cycle always comes back.

What I like about this real estate situation, is this. I suspect the real estate is probably worth as much as the auto business, at least in the larger metro areas, like Toronto, Calgary, Edmonton, etc. If they can sell all their land, they can effectively buy almost twice as many dealerships, with the proceeds. Let's say 50% more to be conservative. What will those investors, who are anchoring on the Auto Business alone think, when ACQ has not 66 dealerships, but 99 dealerships. Most bought during the down cycle in auto's, but now start to see a resurgence in sales. Think of the new income statement. Think of the cash flow statement and think of the new balance sheet...and then ask the all important question:

What would the stock price be then. Perhaps 5 years from today, probably less. Even if it is only $24, it is a great return in 5 years, especially when the dividend is added to it. I suspect you would be seeing a number north of $50, but it is not needed to make this a good idea. What is needed is a person willing to wait 5 years and collect a 3.3% dividend while living with the ups and downs of the daily drama, stocks always want to provide.


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## doctrine

HBC is another stock with real estate holdings worth more than the company. However, that hasn't stopped it from being a poor investment. Autocanada is more than likely to sell its real estate to continue operating at a net loss. This doesn't mean you'll see any of this value. And every time they sell a dealership, their already small net margins decrease as that NOI heads to the REIT.


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## peterk

ACQ coming back hard - Up 6x since the March low and 2x since just before Corona crash.

Glad I held on still, but, hasn't been worth it ...only a bit above my ACB at this point.


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## OptsyEagle

Who would have thought that everyone, all at once, would decide that they really do not want to ride the bus anymore?

Anyway, in our society, cars and their repair, are about as important to us as food and liquor. People may delay the purchase of a new car or truck, but they just never seem to ever forgo it. In the car sales industry, a few bad quarters, in the past, just predict a few blow out quarters to come in the future.

The added plus in this particular business is that at the bottom in March, their real estate holdings would have been worth 2 times the price of their stock. Ever wonder what the land is worth, that all those cars are parked on at those dealerships situated in the middle of some of our largest cities?


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## doctrine

ACQ has definitely been killing it. The pandemic has been a savior as their margins have soared because people are buying bigger vehicles. 

Ever wonder where the stock would be if they didn't dump $110M cash (1/3 of current book value) into money-losing US dealerships? That is what really forced them to sell all that real estate which will lower their margins in a more normalized environment. Maybe they turn it around. It's a competitive environment though.


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## OptsyEagle

Tough to say about the US dealerships. Not sure why they went there but it was a mistake. They seem to have dealt with it for the most part. If they gave it more time there are certainly enough Canadian dealerships to fill their growth needs but everyone always wants to be in the US.

Anyway, the good thing about the stock market is it discounts corporate wins and losses very quickly so you can pretty much look forward every new trading day. The plus is, If you had never bought a bad car dealership, in the past, will you really know what to avoid when you are buying more of them in the future? AutoCanada is a long term story. Plenty of growth acquisitions for them, that are usually priced accretively, right from day one. Not quite the slam dunk it was in March when the share price was in the $5 range. The value of their real estate holdings is worth something close to $12 per share. That was kind of taking money from a baby. At $29 per share it is probably reaching fair value, but it should be able to grow its earnings substantially for a long time to come, so I would think that not long into the future, $29 will seem like quite a bargain, as well. Just have to give it time.


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## fstamand

Truely an impressive come back!
In any case, knowing it hit $5 in April, I am not in a hurry to buy at $29.


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## OptsyEagle

fstamand said:


> Truely an impressive come back!
> In any case, knowing it hit $5 in April, I am not in a hurry to buy at $29.


You should never anchor yourself like that, but I do know why you want to do it. The $5 is history and unless we get a brand new pandemic, it may not ever be seen again. As for the $29. If it goes to $100, it will be a bargain price and if it goes to $15 you overpaid. The important point here is only the future can determine the merits of $29 not the past.

All that said, I did not buy anymore today either... but I am aware I may regret that.


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## fstamand

OptsyEagle said:


> You should never anchor yourself like that, but I do know why you want to do it. The $5 is history and unless we get a brand new pandemic, it may not ever be seen again. As for the $29. If it goes to $100, it will be a bargain price and if it goes to $15 you overpaid. The important point here is only the future can determine the merits of $29 not the past.
> 
> All that said, I did not buy anymore today either... but I am aware I may regret that.


I understand what you mean. My point was just that I would rather invest in stocks that can weather the storm better than how ACQ performed through the plandemic. I also have my doubts that it will reach $100 anytime soon.


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## OptsyEagle

fstamand said:


> I understand what you mean. My point was just that I would rather invest in stocks that can weather the storm better than how ACQ performed through the plandemic. I also have my doubts that it will reach $100 anytime soon.


We all have doubts. ACQ did earn $1.29 per share, in the last 3 months. Christmas is coming up and people still don't want to take the bus. This company, through mom and pop consolidations can grow for decades, and every acquisition is immediately accretive.


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## OptsyEagle

Another good quarter for AutoCanada.






TMX Money







money.tmx.com


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## Synergy

^ Indeed. It's been a wild ride. Rode this one up to $90, down to $6 and now it's back above $30. Nice to be in the green again - ACB in the low 20's.

It will be interesting to see how Western Canada deals with a Biden administration.

I still like the business model and think they have room to grow / expand across Canada.


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## peterk

What is going on here? up 50% in 2 weeks? and +25% on the day last week when they announced a bond offering? Is that all the news?

Wondering if it's a good price to sell now... or is the the momentum just beginning?


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## fstamand

OptsyEagle said:


> We all have doubts. ACQ did earn $1.29 per share, in the last 3 months. Christmas is coming up and people still don't want to take the bus. This company, through mom and pop consolidations can grow for decades, and every acquisition is immediately accretive.


Well I stand corrected. Truly impressive!


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## OptsyEagle

These guys could grow for years. The reason for the 25% pop was not because they issued a boat load of bonds but because they already have deals in place to allocate most of the money. Every auto dealer acquisition is always accretive to earnings and their seems to be an endless supply of them.

Is $49 the right price for the stock today I can't say. It has had a good run lately, but as I said, that is because their future shows a very large opportunity for growth ahead of them, so I will let each investor determine that. Good luck to all.


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## peterk

So the bond issue was an indication that there's an intention on going on an unexpected acquisition spree? And that this activity is so profitable that the stock pops 25% (and now 50%) in mere anticipation?


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## OptsyEagle

I don't understand it much more then anyone else but it appears that investors only notice these things when other investors also notice them. During the pandemic drop in March I was lucky enough to pick up a boat load of shares in the $7 range. At that price there was almost no risk at all. The value of just their real estate holdings; you know, all those massively large car lots, in the middle of those very expensive cities, where any developer could build numerous condo buildings and list them with all those other houses and condos that everyone talks about how expensive they are getting these days? You could have paid off all of ACQs debt AND still had over $7 left by just selling those real estate holdings. ACQ actually did sell a few, which was why it was so easy to calculate. They did a few sale and leaseback transactions, but not many.

It even took a long time for the market to figure that out. As I said, I don't understand why it takes a more expensive stock (perhaps it is because those are the ones that look like they are going up) to get investors to look more closely at the actual investment story, but it seems to.


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## hboy54

OptsyEagle said:


> I don't understand it much more then anyone else but it appears that investors only notice these things when other investors also notice them. During the pandemic drop in March I was lucky enough to pick up a boat load of shares in the $7 range. At that price there was almost no risk at all. The value of just their real estate holdings; you know, all those massively large car lots, in the middle of those very expensive cities, where any developer could build numerous condo buildings and list them with all those other houses and condos that everyone talks about how expensive they are getting these days? You could have paid off all of ACQs debt AND still had over $7 left by just selling those real estate holdings. ACQ actually did sell a few, which was why it was so easy to calculate. They did a few sale and leaseback transactions, but not many.
> 
> It even took a long time for the market to figure that out. As I said, I don't understand why it takes a more expensive stock (perhaps it is because those are the ones that look like they are going up) to get investors to look more closely at the actual investment story, but it seems to.


It is the broken brain. People fear a short term loss more than they value a long term gain. They focus on not losing money in the short term, not gaining in the long term. So ACQ at $20 after falling from $100 doesn't work for them because it might (and did) fall to $7. Recency bias. Buying "on the way up" at $30 or $50 appears lower risk even when clearly $50 is >> $7 and thus actually higher risk. Also recency bias.

I love volatile stocks in the business of long term useful things that have a 5:1 to 50:1 high/low price over a few years. I have done well over the years with the likes of TECK, MX, Norbord, Nova Chemicals, various oil and gas, HCG etc. Was under water years at a time on most of these names, buying more at lower prices, bloody hands catching falling knives, driving the ACB ever lower, until one day the sun comes out.


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## Synergy

hboy54 said:


> It is the broken brain. People fear a short term loss more than they value a long term gain. They focus on not losing money in the short term, not gaining in the long term. So ACQ at $20 after falling from $100 doesn't work for them because it might (and did) fall to $7. Recency bias. Buying "on the way up" at $30 or $50 appears lower risk even when clearly $50 is >> $7 and thus actually higher risk. Also recency bias.
> 
> I love volatile stocks in the business of long term useful things that have a 5:1 to 50:1 high/low price over a few years. I have done well over the years with the likes of TECK, MX, Norbord, Nova Chemicals, various oil and gas, HCG etc. Was under water years at a time on most of these names, buying more at lower prices, bloody hands catching falling knives, driving the ACB ever lower, until one day the sun comes out.


Patience, turn the DRIPs on and be rewarded in the long run. It's interesting how some of your dogs end up being top performers. Volatility isn't for everyone.


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## OptsyEagle

So AutoCanada had another incredible quarter for Q2 2021. I have linked the report for anyone to read for yourself and for those who like to do a little more due diligence and are tired of listening to Covid videos, I linked the conference call that gives a lot more clarity to the Auto retail market, for some change of pace:

Highlights:

EPS for Q2 = $1.23 per share.

Growth in just about every sector in their business: New Car sales, Used car sales, Finance and Insurance, and Repair business. 

ACQ is benefiting from the current supply constraint from Auto Producers, who have been reducing production due to current chip shortage. ACQ currently has 3 months of New Car supply and 65 days of Used car supply, as of the end of July. This is much higher then most of their competitors, providing an advantage accordingly.

75.5% of their Used Car sales can also be supplied by estimated lease and trade returns to their dealerships. Lease returns are very profitable because their price is almost always based on residual values, determined 3 to 4 years ago, and of course, those cars are currently worth much more then that today. So that profit tends to go to the dealership.

There is currently a very large pent up demand for cars in both the Canadian and US markets due to Covid and other supply issues. Expect to maintain current high dealership margins for at least a few years going forward, even when the supply constraints are fixed by manufacturers.

ACQ currently has new acquisitions of dealerships under "Letter of Intent" that should be announced before the end of this year, that will produce over $500 million in revenue, with most negotiated at prices before 2020.

Their current debt level has been reduced to almost non-existent after Q2. Free cash flow is at record levels.









AutoCanada Reports Record Second Quarter Results - Net Income Of $37.7 Million Outpaces Prior Year by 288% and Adjusted EBITDA of $70.5 Million Ahead of Prior Year by 1,360% - AutoCanada Investor Relations







investors.autocan.ca







AutoCanada Inc. – Second Quarter 2021 Results - 1354742


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## peterk

Wow great! I trimmed a few shares off last week at $51. 😝


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