Good morning Lou,

I have been tracking Boyd Group for some time, they are making quite a few acquisitions all through North America. Management looks strong.What is your take on long term growth and sustainable dividend.

Thanks
Ken

Hi Ken,

Thanks for the assignment. Boyd Group Income Trust (BYD.UN TSX) is an interesting case of a management team that found a way to continue to operate as an income trust and increase its distributions to unit holders. Over the years  BYD.UN has developed a profitable footprint in the United States. They use cash generated south of the border to pay unit holders their monthly distributions. Those funds are not subject to the tax revisions embodied in the provisions announced on October 31, 2006 by The Harper Government. You have to love it when aggressive branding cuts both ways.

Another internal restructuring announced by the company is that they intend on transfering allowable tax deductions to their U.S. operations where they pay higher tax rates. This move also provides the company with additional cash.Currently BYD.UN offers a yield of 4.4% on a payout ratio of 24.7%.

The charts will tell the tale of where this trust has been and where it might be going.

The three year chart provides a textbook example of a strong advance with some challenges but no breaches of support. The move from the December 2008 lows at $2.00 has provided ample rewards for investors who rode through the rough patch in mid 2010 when the units tested support along the 200 day moving average.

The six month chart depicts the move higher in late March of 2011 on the anticipation and reporting  of  Q4 results which took the units over $9.40. The MACD generated a buy signal on March 21, 2011 when BYD.UN was trading at $8.25. A 14.5% capital gain in less than three weeks is attractive to say the least but does suggest that the units have gotten ahead of themselves and are likely to pull back a bit.

BYD.Un is in the profitable segment of auto repairs servicing the needs of the auto insurance industry. They are growing through acquisitions and focus on deals that are accretive to earnings. The fact that their management team found a way to increase their distributions to unit holders is a tribute to their inventiveness and creativity. Those factors alone should give you some comfort as the the long term prospects for this trust.

MAKE IT A MASSIVE WEEK AND HAPPY CAPITALISM!

Hi Lou,

I have kept track of you since your days in television. You are doing great.
Once Toyota fixes the  problems would it be a buying opportunity?
Thank you,

Mike.
Medicine Hat, AB.

Hi Mike,

Thanks for your support over the many years! I have had the opportunity to visit Medicine Hat and have to say its one sweet town. Your question regarding Toyota Motor Corp ( TM NYSE) is a good one and I have been watching the chart to see if a bottom is forming.

The three year chart provides a view of the breakdown in the uptrend that began as the recalls made their way through the market. TM got a good lifet off the March 2009 lows and then started to trade in an up channel oscillating between support and resistance. The break below the 50 and 200 day moving averages in January as the recalls hit were generating a signal to get off the ride and preserve capital.

The six month chart gives a better view of the most recent action in the stock. TM looks to be forming a double bottom which would signal a trend reversal. There is support at $72.00 and MACD and RSI are close to signaling a change in momentum but are not quite there yet.

When I look at a chart like this I have to admit that they are not my favorite. The stock isn’t going up, its trading below its 50 and 200 day moving averages and the uptrend is broken. In these cases we are trying to anticipate a bottom instead of confirming one. It makes me wonder if we are expecting too much from this company?

That beiing said at times we have to hold our noses and take a position.If you are going to enter TM at this point you have to be prepared to trade it for income as there is resistance at $76.00, then $78.00 and then again on the 200 day moving average at $80.00. If it made a clean run to $80.00 it would generate a return of close to 9.5%.

MAKE IT A HUGE OLYMPICS AND HAPPY CAPITALISM!
 

Hi Lou,

Avid listener of yours on AM640, keep up the good work. I have been watching General Motors stock and I can’t help but wonder that there might be an opportunity here. They appear to be on the right track with their restructuring efforts and I was wondering if it might be a good time to purchase some GM stock at bargain basement prices? Your thoughts?

Happy Capitalism!

Ken

 

Hi Ken,

Thanks for your support and make it a huge 2010! I have had a number of emails regarding this stock so here’s the story on General Motors.

After the U.S. and Canadian Governments stepped in during 2009 to save GM the path to the restructuring was the creation of two separate corporate entities. One called “Good GM” got all the viable assets while ” Bad GM” got all the questionable assets.

The assets of ” Bad GM” trade on the Pink Sheets in the US  as Motors Liquidation Corp.,( MTLQQ – PINK). I think the name says it all. This is the graveyard for the problems that were once part of the GM portfolio. At some point in the future ” Good GM”  will go public and offer shares to investors. When that happens it may be a stock you should consider for your account but as far as MTLQQ goes, avoid it like the plague!

MTLQQ will wind up worthless and I think the chart tells the story quite well. There was no reason to be in the stock going back to November of 2008. You can see the death cross in place in December of 2008 and a trend line for close to two years and screaming sell!

Lets move along folks there’s nothing to see here.!

Happy Capitalism!

Hi Lou,

What do you think of American Lithium Minerals Inc and the supposed link to the

re-birth of GM and other car makers?

Craig

Hi Craig,

Great question! You have identified the time honored tradition of jumping on a band wagon and riding the wave. For a period of time simply invoking the sacred words will move stocks higher. During the tech bubble any press release with the word internet usually did the trick. In the Western Canadian Sedimentary Basin the mention of the Bakken Formation will generally attract interest.

I get the same gut feeling as you do when I look at American Lithium Minerals Inc. ( AMLM TSX). The fact that the company is listed on the Nasdaq OTC BB puts a warning flag on the track for me. It is a high risk environment as I have mentioned several times before.

You can play cards in a legitimate casino that is regulated or in a garage in Brooklyn. Its your call. For my money go for the facility with the valet parking. Risk management protocols suggest a review and understanding of the environment where your hard earned money will be deployed.

American Lithium Minerals Inc. was listed as Nugget Resources and as of September 30,2008 was not engaged in any business activity. At best the company has limited experience in its chosen field of developing deposits of lithium in Nevada.

The connection between lithium brine ponds in Nevada and batteries for the auto industry is not a direct one. AMLM has to first build a facility to recover the lithium from the brine and then sell it to a battery manufacturer who in turn would sell the batteries to the car makers.

Another question to consider in the AMLM story is whether it is lithium that is in short supply globally or is it the other rare earth elements that go into the batteries that will be in short supply?

Lets look at the chart.Big lift off since May and RSI clearly shows that the stock was overbought. On average these types of advances can’t be sustained. Although cheers to those who got in at $0.30.

The three month chart indicates selling from the top and the MACD signaled the turn. If you own AMLM you want it to hold at $1.00.

Stock trading in a high risk market, company with a resource but no production, stock selling off from an aggressive advance, and no significant news to justify the advance. In these cases its not a question of making money but whether you will get pickled.

Happy Capitalism!

What is your assessment of Linamar. I was at their annual meeting and was quite impressed. Is it still a good investment for the future?

I really enjoy you on CFPL AM980

Hi Norm,

Linamar  Corporation (LNR TSX) has recovered very nicely from the March lows when it traded down to $2.oo which you have to like. The major driver on the recovery in the stock price is the anticipation of a consolidation in the auto parts business.

The reduced demand for motor vehicles has the assemblers looking to do business with healthy suppliers who won’t create more problems for them by closing their doors and messing up the just in time inventory process that has parts arriving at the plant at the right moment.

Another factor in the auto parts sector is that the U.S. Government has said that it is not considering any new federal aid unless there is a threat to auto production. That puts pressure on companies that don’t have healthy balance sheets.

LNR is seen as one of the companies that has the resources to survive and thrive through the economic crisis.

The three year chart shows the dramatic rise in the stock since March. The big surge in May was driven by better than expected results in Q1 but keep in mind we are talking less bad news not great news. Sales slowed and the company generated a loss in the period. LNR is scheduled to report Q2 on August 13.

The stock got through resistance at $12.50 and if it can maintain that level as support it meets another level of resistance at $15.00

The three month chart shows the MACD in an uptrend which suggests a continuation of the advance.

Now before getting all giddy about the prospects lets keep in mind that we are approaching the month of September which can be an unkind month for investors.

In addition options traders are taking the side of a September sell off and money manager Mark Mobius is calling for a 30% drop in global stocks.

For my money I would ask myself if I expected a stock, that ran from $2 in March and closed on Friday at $13.05,  to have more gas in the tank in the short term.

Long term I do see LNR as a winner because of their opportunity to consolidate the weaker players in their sector. Its just a matter of finding the right entry point.

Happy Capitalism!

Dear Sir,
Is there a real explanation for the run-up of AZD and why on earth can it fall so fast in one day June 2nd.  I can understand some profit taking and the 100,000, shares at 25 cents which someone could profit by, but the drop confuses me.
Bill

Hi Bill,
Thanks for the assignment! And you can call me Lou. Its been a while since I looked at Azure Dynamics (AZD TSX) which has been developing niche applications of hybrid technology for commercial vehicles. They have integrated their products into 40 different types of trucks and buses and have logged over 25 million highway miles. But the volume of sales is low. In all of 2008 their total revenue was just over $7M and they continue to lose money.
In their annual report their goal is to double revenue in 2009. They have sold 105 systems to Purolator, 20 to FedEx and have 27 dealerships selling their product line. Which tells me that they are still in the nascent stage of market penetration which in most cases will drive a man to drink!

When I look at the chart the best explanation for the selling in early June was that the signals generated by the RSI and MACD  and resistance at $0.30  indicated it was time to take some profits off the table.

The RSI showed an overbought condition through a good part of May and the MACD turned down as well. When traders see those flags on the track they pull into the pits to refuel and get a tire change.

The longer term chart shows that the downtrend has been broken and we do have a golden cross in place which suggest a continuation of the uptrend.

On June 11 the company announced a private placement which hasn’t been priced and which is looking to raise $10M.

Given the generally positive environment for green transportation technologies AZD seems well positioned to advance its case but it needs to drive sales much faster to really get traction.

Happy Capitalism!

Hi Lou,

I always tune in to hear you on 640! Keep up the good work. 

I’d like your thoughts on US:SLAT.  With the transitions to cell powered vehicles in the near future, does this look like a good buy now? There have been some positive movements in their development, but I’d like your trained eye to have a peek.

Thanks for the help
Cheers
Scott

Hi Scott,

Clearly we need some breakthrough science to help us get to the next form of transportation fuel.  But I have some concerns whether Super Lattice Power ( SLAT NASDAQ BB) will be one of the companies that takes us to the promised land.

The first red flag for me is that its listed on the OTC BB which is a lightly regulated environment and for my money a high risk market place.

The second thing that puts me in a cautious mood is that their web site is light on steak big on sizzle. 

The third thing that has me checking for my wallet is that there are no financial reports so you can’t even look under the hood.

The fourth thing that has me on guard is that all the news on the company is coming from what I would call tertiary sources.

Frankly there isn’t enough to go on to really make an educated decision and the chart indicates choppy trading at best.

Lets keep hunting and look for something with a bit more meat on it.

Happy capitalism!

The Future-- Is Waiting For The Will To Make It Real

On the Oakley Show Today I made some comments about the conflict between motorist and cyclist as the City of Toronto tries to accommodate both sets of constituents. What gets lost in the push and pull of access to the streets is the alternative of moving one of the users either above or below ground. They don’t have to compete for the same space.

I suggested an elevated bike-way – covered to encourage cyclist to use them under all conditions. Here is an artists vision of an elevated bikeway. Will it be free? No! But we have been living off the infrastructure investments made by our grandparents and parents. Its time to step up to the challenges.

Happy Capitalism!

Hard Come, Easy Go

John from Brampton, Ontario writes about what “losing money” actually means:

Hi Lou,

I listen to your report with John Oakley at 6:55am and was wondering if you could answer the following silly question for me and others like me:

When you say that “GM lost $10billion”, what do you mean by “lost”?  How do they lose money? And who keeps giving them money to go out and lose? Sorry for the newbie question, but the “losing money” term is just thrown around and I don’t know what it means.

Hi John,

Thanks for asking this question and please never be afraid to ask for clarification of any item that you don’t understand. That’s what learning is all about!

When we say GM Lost $10B it means that their expenses exceeded their revenue by $10B in the period discussed be it the fiscal quarter or the fiscal year. Typically when a company loses money on that scale they have to dip into their assets and borrow more to get to the next period. Unfortunately for GM they have burnt through their assets and cash and have tapped out their ability to borrow and are now leaning on the U.S. Government to provide them with cash to keep the door open.

Not to get into abstractions but there can also be non- cash charges to earnings that result in an quarterly or fiscal year loss when a company writes down the value of their assets. These charges are usually a write down of good will from an asset but don’t drain cash out of the treasury.  If you look at the recent quarterly report from Torstar they wrote down the value of their assets in CTVglobemedia which resulted in a loss for the quarter but no draw on cash.

Happy capitalism!

Good morning Lou,

As I listened to AM640 this morning with you talking about a GM pullout of Canada I thought that with all the various levels of governments previous incentives, could we not keep all the equipment and start our own car company? Canada Motor Company, C.M.C.

Thanks, Happy Capitalism.

Lionel

Hi Lionel,

There are a number of limitations in taking an existing plant and converting it to produce a new model. If I was thinking of doing that I would immediately call Magna International.

Building a Base

They not only build and supply parts to their clients but have assembled complete vehicles for BMW.  Don’t forget that MG.A was nosing around Chrysler when Daimler was looking to off load the boat anchor. They are probably glad they missed that ride!

So if GM were to pull out of Canada I would look to Frank Stronach and his crew to be part of a solution. But keep in mind that if the governments get involved all bets are off. Just think about the fiasco that was the gun registry.

One other thing to keep in mind is that there is a Canadian auto maker called Zenn Motor Company Inc. They produce electric vehicles and own a piece of an ultra capacitor company out of the United States.

Zenn has met lots of regulatory challenges that have kept their vehicles off the highways but the concept is interesting.

Early Stage Electric Vehicles

The problem with early stage developments is that they are at risk of running out of money before they gain market acceptance. But if you are going to shovel billions into the likes of GM and Chrysler why not look at an alternative.

Happy Capitalism!