# CFN.TO Carfinco Financial Group



## gibor365 (Apr 1, 2011)

Just came accross TSX stock CFN Carfinco Financial Group. Chart looks very good. Dividend almost 5%. Very low payout ratio. Is anyone hold this stock? Any opinions?


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## riseofamillionaire (Feb 23, 2012)

gibor said:


> Just came accross TSX stock CFN Carfinco Financial Group. Chart looks very good. Dividend almost 5%. Very low payout ratio. Is anyone hold this stock? Any opinions?


I stopped myself from buying at $4 b/c i thought it couldn't go much higher, I was wrong. This is still in 'the ones I missed' catagory for me


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## dubmac (Jan 9, 2011)

hey gibor..I saw a reference to this stock today on stockchase.ca. I don't know anything about the stock, & I don't know much about the guy (Donville?) who posted it - but he suggests that the stock will increase its divvie and the price will rise. as always do your own dd. http://www.stockchase.com/Opinion.php


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## gibor365 (Apr 1, 2011)

Yes, I've read his comments.... and i checked this guy's last top picks...usually his top picks are up  Oh Oh , don't know what happened but today this stock is up 3.6% 

Actually, all his 3 Top picks were up today! Interesting if investors just follow his recommendations and bumping stock price?!


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## doctrine (Sep 30, 2011)

Jason Donville has been recommending this stock for years. That being said, he is known for beating his index by quite a margin so its possible an institution is taking a bet. Or an institution is buying just to push up the price for anyone else and will be selling the stock back to you at a quick 5% profit. You just never know  But if Carfinco increases its dividend by 15-20% then what does it matter if it has gone up 3.6%?


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## PMREdmonton (Apr 6, 2009)

For anyone interested in this stock it come back after shooting up after some Jason Donville pumps on BNN and is now back down around 10.25 where it is selling at about a PE of 13.5 and a divy of 4.7%. This company has been a great performer over the last several years both in terms of capital gains, dividend yield, dividend growth, sales growth and earnings growth. They still have a decently long ramp for earnings as their market cap is only $250M.

So you have a great performing company with a very good divy and divgrowth now selling at a reasonable valuation again. So it looks like a good buy but I don't understand why it isn't selling for a higher premium and why it has sold off recently. There is no obvious news to me to change sentiment on the company. Anyone have a guess as to why the selloff has occurred and whether it is warranted or not.

If it hits 9.50 I'll definitely buy it. I'm considering putting in an order to buy at 10.

What do you guys think?


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## liquidfinance (Jan 28, 2011)

Wow. Just had a look at the price chart for this. $0.28 in 2009! If only 


Looks and interesting company but still seems to be at a bit of a premium. Impressive ROE though!
Added to the watch list.


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## PMREdmonton (Apr 6, 2009)

liquidfinance said:


> Wow. Just had a look at the price chart for this. $0.28 in 2009! If only
> 
> 
> Looks and interesting company but still seems to be at a bit of a premium. Impressive ROE though!
> Added to the watch list.


I don't know, a PE of 13.6, dividend yield of 4.7%, huge dividend and EPS growth over the last several years.

I would argue you're buying in at a substantial discount.

To me the big risk is whether they are extracting enough premium off of the loans they offer. They basically offer loans to non-creditworthy customers that banks won't lend to for car purchases. If they lend too much and have too many loan failures they will go belly up. I wonder if the potential economic slowdown and risk of a rise in unemployment and hence non-performing loans is what is driving the recent sell-off.

The price has dropped enough to pique my interest but I'd still like it a bit cheaper. I am committed at 9.50 but may nibble at 10.


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## sags (May 15, 2010)

Their success in the subprime auto lending business has not gone unnoticed...........and they now have a growing list of competitors.


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## notworking (Jan 18, 2013)

i have a co-worker that has a car financed trough them, he pays a 29.99% interest on his car. this is how i found out about the company. apparently some people does not mind how much they pay as long as they have a car.

holding 100 shares atm


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## liquidfinance (Jan 28, 2011)

notworking said:


> i have a co-worker that has a car financed trough them, he pays a 29.99% interest on his car. this is how i found out about the company. apparently some people does not mind how much they pay as long as they have a car.
> 
> holding 100 shares atm


OUCH! :eek2 

But this is exactly what worries me about the company. A slight dip in the economy could see the easily fail. 

The question is how many of the loans are made to newcomers to Canada who can easily afford the loan but do not have the required "Canadian Credit File" This would to me be a lot lower risk loan.


Was VFC a similar company? My wife used to work for these and she said the interest rates were horrific. They were purchased by TD I believe in 2006. Maybe these could be a takeover target.....


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## liquidfinance (Jan 28, 2011)

Ah yes. 

Just found this link. Might have a look and see how these companies compare. 

http://www.td.com/document/PDF/investor/2006/td-investor-2006-vfc.pdf



> About VFC
> With its focus on non-prime automotive purchase financing, VFC Inc. (TSX: VFC) is one
> of the largest Canadian-owned indirect consumer finance companies in Canada. VFC's
> loans originate through its network of more than 2,000 pre-qualified automobile dealers
> ...


Maybe some members on here previously held this stock.


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## sags (May 15, 2010)

There were subprime lenders before Carfinco came along............and even years ago there were lenders called "finance companies" who gave loans to people for products the banks wouldn't finance......Avco Finance comes to mind. Home equity lines of credit put them out of business.

Carfinco found the sweet spot..................and jumped into the market just as the auto manufacturers were in financial trouble and were selling their auto financing divisions to raise cash (GM selling GMAC for example).

The car manufacturers soon learned that the other lenders they were counting on to finance their cars, had higher lending criteria and a lack of credit for potential customers really hurt manufacturer sales. They started to offer huge discounts for "cash only" sales. Sales tumbled, leasing disappeared..........and the manufacturers had to do a reversal and buy or develop their own dedicated lenders again.

After they re-acquired their own lenders...........they could lower the credit requirements, which they have done, and some of those people forced to pay high interest to subprime lenders for lack of credit......qualified to buy new cars at much lower interest rates than for a used car and subprime lender.

Other subprime lenders have jumped into the space as well..........Cars on Credit company as one example.

This is not to say that Carfinco is not a good company, but I wonder how much more upside they have from here.

There were persistent takeover rumors about Carfinco, which didn't come to fruition......and may have pushed the stock price up along the way.

During the last recession, their default rate did spike........but it is pretty low at this time.

There is also the "consumers buried in debt" story we read about all the time, which may affect default rates in the future.

Interesting to note..........the Cash Store payday loan company is publicly traded, is one of the largest payday loan companies, charges 21% until the next payday is due plus illegal extra charges, and is reporting losses on their financial statements.

How do they manage that..............with the exorbitant rates they charge?

It appears the executives and "investors" who put up the cash to borrow are doing quite well.............and the shareholders.............not so much.

Caveat emptor.


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## notworking (Jan 18, 2013)

under 10$ as i write this message

http://www.marketwire.com/press-rel...al-common-share-financing-tsx-cfn-1771399.htm


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## liquidfinance (Jan 28, 2011)

Back down to $9.65 It could be time to start a position. P/E 12.3

Quite the sell off recently but seems overdone based on the results.


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## doctrine (Sep 30, 2011)

Down 26% from the 52 week high. The yield is a solid 5% here. It's not likely they're going to have earnings any lower than this, it's only up from here. This would be high on my list of positions to add to (I have 1200 shares).


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## Killer Z (Oct 25, 2013)

Purchased today at $9.54. I really like this company and the prospects of them growing through the summer.


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## Synergy (Mar 18, 2013)

I found this quite interesting:



> Lenders to the lowest segments of the auto borrowing population. In the D class and they dominate the D class. Install devices in the cars, so if a borrower is behind in payments, they’ll make your horn honk for 20 seconds. If you are 30 or 60 days behind, your ignition won’t start. If they have to repossess, they have a GPS system for this. Dividend is very sustainable and they have a lot of potential to increase their dividends


Is that standard practice nowadays? - GPS, ignition kill switch, etc. Great way to take advantage of technology.


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## OptsyEagle (Nov 29, 2009)

Synergy said:


> Is that standard practice nowadays? - GPS, ignition kill switch, etc. Great way to take advantage of technology.


That was/is their competitive edge. 

Remember, it is not that deadbeats don't have any money at all over any given month, it is just that they seem to think that they can decide who they pay and who they don't. Well, where once the auto loan would be considered very low on the list of bills to pay, for these folks, when your alarm is going off every time you turn the ignition key on, you tend to want to find someone else to not pay. It would do wonders for creating a lower then normal loan loss ratio. 

The only problem I see now is that everyone knows about it, so all their competitors have this advantage as well and can start pricing it into their lower rates. Also, since they deal with auto dealerships, I worry that those unscrupulous salespeople will eventually start fudging the applications once they start to understand how it works. Just like the mortgage brokers did to Fannie Mae, I worry the same fate will eventually happen here. With finance companies, they can have one good quarter after another, and then ... presto, the next quarter they are bankrupt. Anyway, if they were giving the shares away, I would look closer, but not at this price. At this price you will get your dividend quarter after quarter and then presto the share price will crater and wipe out all the past dividends and then some. That is my opinion, anyway.


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## Feruk (Aug 15, 2012)

I owned this one from ~$7 to ~$11 but sold. This ignition-kill technology was an incredible advantage, but now there's competition. As well, it isn't installed into their US cars. Their loan losses may grow as a result of going into the USA. They have more Canadian competition which may cut down on their margins. Overall, I was a very happy shareholder for a while, but I think there is easier places to make money off stupid people right now. I rate this on par with owning booze, cigarette, and US prison companies. Check out Corrections Corp (NYSE: CXW).


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## Mechanic (Oct 29, 2013)

I dealt with these guys years ago as a retailer of their services. Averaged down in my non-reg and added some in my TFSA. I'm pretty confident it will go back to around $13. Dividend every month in the meantime.


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## Killer Z (Oct 25, 2013)

Mechanic said:


> I dealt with these guys years ago as a retailer of their services. Averaged down in my non-reg and added some in my TFSA. I'm pretty confident it will go back to around $13. Dividend every month in the meantime.


I agree, as does Jason Donville:

_"Earnings are good, but the stock is kind of stalling out as if we are in a late cycle phenomena. Thinks you would see a good quarter out of them and things look good for next year. Would be very comfortable buying it here at around $11."_


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## liquidfinance (Jan 28, 2011)

I decided to open a small position yesterday. Good luck all!


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## Edgar (Mar 24, 2014)

already up 55 cents


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## Killer Z (Oct 25, 2013)

Nice little comeback today after sliding towards its 52 week low yesterday.


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## doctrine (Sep 30, 2011)

I was going to suggest that Carfinco was the best looking small cap on my radar at the moment as the price went towards $8 (and a P/E of 10 with a 6% yield), but it's bouncing back quickly especially today.


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## Synergy (Mar 18, 2013)

Tempting, I've got them on my radar.


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## Killer Z (Oct 25, 2013)

Terrific news for this company:

http://www.newswire.ca/en/story/1382039/carfinco-announces-record-canadian-loan-originations

Would explain the 6-8% jump in the share price these past two days. 

CFN has always screened well, I'm glad I have stuck with them.


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## liquidfinance (Jan 28, 2011)

Seems strange that the price is lagging so much lately.


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## doctrine (Sep 30, 2011)

I think they're turning it around slowly by getting a better leverage ratio and more loans/revenue going. Meanwhile, the stock is continuing to trade at a solid P/E of 10-11. I'm happy to hold. I get the feeling that if I sold, the P/E would immediately jump to 15.


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## liquidfinance (Jan 28, 2011)

Big drop today and I don't see any news. Very cheap company.

Any ideas doctrine?


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## HaroldCrump (Jun 10, 2009)

Only relevant news today I can think of is the car sales figures released by the big 3 auto makers.


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## doctrine (Sep 30, 2011)

HaroldCrump said:


> Only relevant news today I can think of is the car sales figures released by the big 3 auto makers.


Hard to see why that would be bad news - it was the best August ever for car sales in Canada (look at ACQ's reaction today). 

There are two major factors in CFN's price: psychological, and margins/competition. Psychological, because CFN is technically weak and at a 52 week low - who wants to own a declining stock? Fundamentally, the last quarter was fine, margins were down but revenues were up so profits were maintained. Some fear of competition, but CFN has very strong management who are not taking undue risks, the type of company you want to be in with any market. No dividend increase, but very sustainable payout ratio. Return on equity is coming back up as they absorb the US operations and account for the share issue last year, and begin to leverage their balance sheet again. 

I think CFN is a buy at $8 or below for sure - the risk/reward is good at this level. Not a lot of stocks showing a steady P/E of 10, yield of 6%, that is 40% below the 52 week high. If I decide to sell something else, I would add 300-600 shares of CFN for sure (currently have 1200) - it's at the top of my buy list.


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## Killer Z (Oct 25, 2013)

doctrine said:


> Hard to see why that would be bad news - it was the best August ever for car sales in Canada (look at ACQ's reaction today).
> 
> There are two major factors in CFN's price: psychological, and margins/competition. Psychological, because CFN is technically weak and at a 52 week low - who wants to own a declining stock? Fundamentally, the last quarter was fine, margins were down but revenues were up so profits were maintained. Some fear of competition, but CFN has very strong management who are not taking undue risks, the type of company you want to be in with any market. No dividend increase, but very sustainable payout ratio. Return on equity is coming back up as they absorb the US operations and account for the share issue last year, and begin to leverage their balance sheet again.
> 
> I think CFN is a buy at $8 or below for sure - the risk/reward is good at this level. Not a lot of stocks showing a steady P/E of 10, yield of 6%, that is 40% below the 52 week high. If I decide to sell something else, I would add 300-600 shares of CFN for sure (currently have 1200) - it's at the top of my buy list.


Currently at the top of mine also.


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## Freedom45 (Jan 29, 2011)

Just initiated a position here @$7.94.


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## Mechanic (Oct 29, 2013)

Bought a few hundred more shares @7.74. I don't see any reason for the low price.


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## liquidfinance (Jan 28, 2011)

I wonder just how low this could go?

Off another 3% today.


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## OptsyEagle (Nov 29, 2009)

http://finance.yahoo.com/news/carfinco-achieves-strong-finance-receivable-181100577.html


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## Butters (Apr 20, 2012)

Yeah looks good, I don't think it can go any lower. And it has 30% upside at least!
Lots of ppl in this forum are already in.


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## Butters (Apr 20, 2012)

Upgraded today

Industrial Alliance upgraded Carfinco Financial Group to "strong buy" from "buy," keeps $11 (Canadian) price target.

Now we just need the momentum to turn around on this stock!


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## doctrine (Sep 30, 2011)

I added 450 shares at $7.75 on Monday. I then watched it fall to $7.41 on Tuesday and was shaking my head and calculating when I'd add again (answer: probably below $6.50). I took another look at the 'margin' compression and it really wasn't that much, maybe a drop from 41-42% to 40% with business really seeming to be booming. I'm fairly certain there will be earnings growth. They also hinted at more acquisitions in the US.


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## The ruined man (Apr 10, 2014)

I've been watching this one fall for a while and wondering when it might be good to get in. It's had a nice run up in the last week and i'm still sitting on the fence.


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## humble_pie (Jun 7, 2009)

big news in the wee hours this am (mid-morning in spain) - banco santander is paying a big price premium to buy carfinco. Félicitations to all cmffers who are already in the deal.


*Spain's Santander buys Canada's Carfinco for $269 mln*
16 Sep 2014 02:54 ET

_MADRID, Sept 16 (Reuters) - Spanish bank Santander said on Tuesday it had reached an agreement to acquire the Canadian business of auto-financing company Carfinco for C$298 million ($269.3 million).

Santander will pay C$11.25 in cash per share for the business, a 32 percent premium to the volume-weighted average price over the last 90 trading days, the bank said in a statement to the Spanish market regulator.

Carfinco will pay a special dividend to shareholders at the close of the deal as part of the agreement, the bank said.

The sale remains subject to regulatory approval._


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## FrugalTrader (Oct 13, 2008)

Crap, this was on my watch list to add more this week.


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## doctrine (Sep 30, 2011)

Nothing like buying shares on a Monday at $7.75 only to have them taken out at $11.25 a week later. No indication of the magnitude of the special dividend; I doubt this will close until the end of the year. I might hold on for a bit until it is known. In any case, I'll have about $18.5k to invest in something else. Kind of like an early Christmas where I get to go shopping for new shares!


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## humble_pie (Jun 7, 2009)

we might as well all give up & hand our portfs over to doctrine each:


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## liquidfinance (Jan 28, 2011)

humble_pie said:


> we might as well all give up & hand our portfs over to doctrine each:



Well said humble. 

Really kicking myself now as I was itching to buy the day before these recent gains but didn't have any funds to deploy.

Double kicking myself considering I thought it could be a takeover candidate back at post 11


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## bouquets (Dec 1, 2013)

liquidfinance said:


> Well said humble.
> 
> Really kicking myself now as I was itching to buy the day before these recent gains but didn't have any funds to deploy.
> 
> Double kicking myself considering I thought it could be a takeover candidate back at post 11


I'm only half kicking myself. I sold half mine a few days ago.


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## Freedom45 (Jan 29, 2011)

Any thoughts on what the special dividend will look like?


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## humble_pie (Jun 7, 2009)

liquidfinance said:


> ... Double kicking myself considering I thought it could be a takeover candidate back at post 11




dinna fret ye liquid, another bus will be along soon


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## CuriousReader (Apr 3, 2009)

So what do usually happen when a buyout happen?

Do current holders get the new company's stock instead?
Do current holders get cashed out?

Should current holder sell before or hold for the buyout to be completed?


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## liquidfinance (Jan 28, 2011)

humble_pie said:


> dinna fret ye liquid, another bus will be along soon


I'm wondering if it's worth increasing my holding of CPG and then selling some covered calls against them.


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## Freedom45 (Jan 29, 2011)

Currently trading at $11.40. What's everyone's thoughts on holding for the eventual buyout/dividend vs. locking in now? It really depends on what the special dividend payout will be I suppose.


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## Butters (Apr 20, 2012)

I'm with curious reader
I bought this stock (again) a week ago. Up almost 50%

The current value is higher than the 11.25 buyout price

Should we sell now, or collect dividends until the deal completes. 




Also I've said before doctrine should have an ETF lol
I think he fairs better vs the tsx and makes about 2% more dividends!


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## liquidfinance (Jan 28, 2011)

I guess it will depend on the special div. 

If it's $11.25 + special then I guess the price will eventually reflect that once it become known. 
It the dividend will come off the $11.25 then it could be good to sell now.


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## Butters (Apr 20, 2012)

They just said the max amount of the special dividend would not exceed .10 per share

So 11.25 plus possible .10

I just sold for 11.36

If the deal doesn't happen for 2-3 more month the only thing I'll be missing is the regular dividend?


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## liquidfinance (Jan 28, 2011)

I'm out as well. $11.38

CPG or not is now the question.


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## Freedom45 (Jan 29, 2011)

Out @ $11.37.


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## doctrine (Sep 30, 2011)

This is a pure cash takeout. If you hold until the bitter end, the maximum you will get is $11.25 plus $0.10 special dividend plus $0.04 per month regular dividend (which is still being paid) until it closes. I think that maximum time is 3 months (Dec dividend is unlikely), so that's $11.47. Perhaps not a bad return over 3 months (~4% annualized), but I'm moving on. 1650 shares sold at $11.35. 

Buyout day is always a happy day! $1k for a party, $17.7k to reinvest?


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## al42 (Mar 5, 2011)

Sold mine as well @ $11.35.


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## liquidfinance (Jan 28, 2011)

doctrine said:


> This is a pure cash takeout. If you hold until the bitter end, the maximum you will get is $11.25 plus $0.10 special dividend plus $0.04 per month regular dividend (which is still being paid) until it closes. I think that maximum time is 3 months (Dec dividend is unlikely), so that's $11.47. Perhaps not a bad return over 3 months (~4% annualized), but I'm moving on. 1650 shares sold at $11.35.
> 
> Buyout day is always a happy day! $1k for a party, $17.7k to reinvest?




Hats off to you Doctrine. I will be keen to know where you are likely to deploy these funds. There doesn't seem to be too much value around at the minute. 

Atco has come down a bit and I have also been looking at RME.


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## dubmac (Jan 9, 2011)

liquidfinance said:


> Hats off to you Doctrine. .


well done doctrine - congrats on the sell.


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## doctrine (Sep 30, 2011)

Thanks all, and congrats to those who held on as well - it was a volatile ride! I enjoyed how several of us CMF'ers all piled in last week at the buying opportunity - sometimes the sentiment of the forum can tell you a lot about value (whether CMFers are buying, not buying, or selling).

For my proceeds, I am likely deploying about 50-70% of it this week then saving the rest in my war chest. I have an exciting night of hitting the screeners and financial statements tonight before making a game plan! At first glance, I have three positions that I might average down into, but I might find something else too. 

liquidfinance, I like RME, but not ACO.X. When all is said and done, I'll post all of my trades online and update the threads. I agree that there's not a lot of value out there. Banks at average P/Es, pipelines insanely expensive...I'm going to be very picky - all value plays, for sure.


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## martinv (Apr 30, 2009)

Well done doctrine! Are you still on "summer vacation"? miss reading your blog.


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## Killer Z (Oct 25, 2013)

martinv said:


> Well done doctrine! Are you still on "summer vacation"? miss reading your blog.


I too miss the updates on your blog.

Sold @ 11.38 .......no idea where to re-invest but that is not a bad problem to have sometimes.


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## Gimme the Green (Feb 4, 2014)

Congrats to to all the people who took advantage of this opportunity!


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## Butters (Apr 20, 2012)

Why did everyone sell this?

the cash deal buyout has been approved 

Seems like free lunch.


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## Mechanic (Oct 29, 2013)

I sold mine because it was at the buyout price, so couldn't see doing any better. I see it's down again, will be watching again for a possible buy.


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## off.by.10 (Mar 16, 2014)

Same for me, I was lucky to buy about a week before the news. There was no point in holding it afterwards. Now it looks like trouble is brewing again in the PIGS and hurting the buyer, making people think the deal might not go through. That's the only reason I can see for it dropping... otherwise, buying at current prices would be like free money.


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## Butters (Apr 20, 2012)

Same shoes as you. 

The deal has been approved, I imagine in closing very soon. 

Why don't we all take the free lunch here?


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## Synergy (Mar 18, 2013)

Anyone trading this for a potential short term return of aproximately 15%? Letter of intent was revealed on Friday and it's still trading down from the buyout price.


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## oob (Apr 4, 2011)

Synergy said:


> Anyone trading this for a potential short term return of aproximately 15%? Letter of intent was revealed on Friday and it's still trading down from the buyout price.


I hope you got in! I was eyeing this on Thursday, but wanted to sleep on it to see if I could poke holes in my logic.
I was pretty upset I partially missed the boat on Friday, but bought some anyways.

Transaction got approval from Bank of Spain today - it looks like it's happening.


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## Butters (Apr 20, 2012)

There is still a 7% gain to be made 

I knew it was free lunch. Wish I jumped in. 

When do you guys figure it will be delisted, another month?


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## oob (Apr 4, 2011)

Not sure on timing, but don't mind having cash tied up for a couple months.
I kept checking back on this thread to see if people were piling in for the "free lunch" - I figured there was something I was missing.


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## oob (Apr 4, 2011)

out today 3 cents below offer.


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