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Topic: Wealth Management

A Stock to Sell: Investors recommended to sell and take profits with Dundee Corp.

Stock AdviceEvery Monday we now feature “A Stock to Sell” as our daily post. With every stock we recommend as a sell, we give you a full explanation of why we advise against investing in the stock at this time.

DUNDEE CORP. (Toronto symbol DC.A; owns businesses in the wealth management, real estate, natural resource and agriculture industries.

The company lost $92.6 million, or $1.88 a share, in 2013. That’s a big drop from the $25.2 million, or $0.29 a share, it earned in 2012. Revenue fell 6.3%, to $200.7 million from $214.2 million.

The declines came mainly because weak commodity prices hurt the contribution of Dundee’s resource holdings. As well, fewer firms issued shares in 2013, which hurt profits at its Dundee Securities brokerage firm. The company is also spending more to expand its agriculture businesses, which further depressed results.

However, Dundee’s investment portfolio (excluding its consolidated subsidiaries) had a market value of $1.2 billion on December 31, 2013. That’s equal to 1.3 times its market cap.


A 20-year gain of over 500%

In every issue of The Successful Investor, you get reports on up to 20 stocks that Pat McKeough feels have exceptional value for Canadian investors, all accompanied by his clear buy-hold recommendations. And when he believes it’s time to sell, he tells you that, too.

The Conservative portfolio in The Successful Investor shows just how effective these recommendations have been. Over the 20 years of its existence, the stocks in this portfolio—and they include banking, retail, resource, transportation and utility stocks—have had an average gain of 524.2%. That’s almost 100% better than the 262.9% cumulative gain of the TSX over the same period.

To tap into these results at a very low price, you can try an introductory subscription to The Successful Investor. Click here to start your risk-free subscription now.

Stock advice: Irregular earnings from real estate and resources add to risk

Dundee is more risky than most of the stocks we recommend. Many brokers avoid it due to its complex holding company structure, so it has little following among institutional investors. Irregular earnings from real estate and resource operations also add to its risk, and the lack of a dividend hurts its appeal.

However, like most holding companies, Dundee typically trades at a discount to the market value of the assets it held. Occasionally, it would unlock some of this value, as it did in 2011 when it sold its Dynamic mutual fund operations. In 2013, it spun off its commercial real estate subsidiary —DREAM Unlimited (Toronto symbol DRM)—as a separate company.

The stock gained 618.2% (or 10.8% compounded annually) for us from the time we first recommended it in the April 1995 issue of The Successful Investor.

However, Dundee could have a hard time duplicating its past success. Investor interest in junior stocks is not as strong as it used to be. Dundee is also shifting into risky alternative investments, such as land and other privately held assets.

We now think investors should sell and take profits in Dundee Corp.

Last week we had a sell on a Canadian stock trying to make a breakthrough in the solar power industry. If you missed it you can see the article here.


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