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A Member of Pat McKeough’s Inner Circle asked for his advice on an ETF that focuses on Canadian finance firm common shares, preferred shares and corporate bonds.
Pat likes the high distribution rate but warns that rate may be unsustainable....
Pat likes the high distribution rate but warns that rate may be unsustainable....
In last Friday’s Wall Street Stock Forecaster Hotline, we analyzed the great results that McDonald’s Corp., $111.55, symbol MCD on New York (Shares outstanding: 941.8 million; Market cap: $105.7 billion; www.mcdonalds.com), reported for the three months ended September 30. It was a standout quarter, particularly compared to the weak results that many companies have reported this year.
The first media comment we saw on these results took the view that the stock had gone up enough to offset the improvement in its results. The investment reporter quoted what he called “cynical observers” who said “there was almost no way but up” for the stock. These observers pointed out that McDonald’s had trailed the market by 62 percentage points during a recent three-year period, and that the company had only registered growth in global same-store sales in one quarter out of the past seven.
The statistics in the last sentence are true. But when you analyze a stock, you can come to a wide range of conclusions, depending on the breadth of data you choose, and the beginning and end dates of the periods you look at.
McDonald’s stock price rose from pennies per share (adjusted for stock splits along the way) in the 1970s to a peak of $45 in 1999. Like a lot of high-quality stocks, it suffered in the first few years of the new millennium, and fell to as low as $12 in early 2003. Then it began another monumental rise.
It sailed through the 2008-2009 market downturn with barely a scratch. It hit an all-time high of $67 in August 2008. The following month, the U.S. federal government took control of mortgage giants Fannie Mae and Freddie Mac, and Lehman Brothers filed the largest bankruptcy case in U.S. history. McDonald’s fell on this news like the rest of the market. In October 2008, it hit $46, an 18-month low. The stock then resumed its rise and hit $100 in October 2011.
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The first media comment we saw on these results took the view that the stock had gone up enough to offset the improvement in its results. The investment reporter quoted what he called “cynical observers” who said “there was almost no way but up” for the stock. These observers pointed out that McDonald’s had trailed the market by 62 percentage points during a recent three-year period, and that the company had only registered growth in global same-store sales in one quarter out of the past seven.
The statistics in the last sentence are true. But when you analyze a stock, you can come to a wide range of conclusions, depending on the breadth of data you choose, and the beginning and end dates of the periods you look at.
McDonald’s stock price rose from pennies per share (adjusted for stock splits along the way) in the 1970s to a peak of $45 in 1999. Like a lot of high-quality stocks, it suffered in the first few years of the new millennium, and fell to as low as $12 in early 2003. Then it began another monumental rise.
It sailed through the 2008-2009 market downturn with barely a scratch. It hit an all-time high of $67 in August 2008. The following month, the U.S. federal government took control of mortgage giants Fannie Mae and Freddie Mac, and Lehman Brothers filed the largest bankruptcy case in U.S. history. McDonald’s fell on this news like the rest of the market. In October 2008, it hit $46, an 18-month low. The stock then resumed its rise and hit $100 in October 2011.
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Costco Wholesale Corp., $156.24, symbol COST on Nasdaq (Shares outstanding: 439.5 million; Market cap: $68.6 billion; www.costco.com), owns and operates warehouse-sized stores that sell a wide variety of consumer goods. The company charges its customers an annual membership fee, usually $55 a year, to shop in its stores. It has 687 outlets, including 481 in the U.S., 89 in Canada, 36 in Mexico, 27 in the U.K., 23 in Japan, 12 in South Korea, 11 in Taiwan, seven in Australia and one in Spain. It also sells products online in the U.S., Canada, the U.K. and Mexico. Costco plans to open up to 32 more outlets in the next year. About half will be outside the U.S., including a second store in Spain and its first location in France....
Arsenal Energy Inc., $1.76, symbol AEI on Toronto (Shares outstanding: 19.3 million; Market cap: $34.1 million; www.arsenalenergy.com), produces oil and natural gas in Alberta, British Columbia and North Dakota. Its output is 76% oil and 24% gas. In the three months ended June 30, 2015, Arsenal produced 3,846 barrels of oil equivalent a day, down 10.4% from 4,292 barrels a year earlier. That’s because the company shut down some of its less profitable wells in response to low oil prices. Overall cash flow fell 47.0%, to $6.2 million from $11.6 million, while cash flow per share dropped 52.1%, to $0.34 from $0.71, on more shares outstanding....
Athabasca Minerals, $0.30, symbol ABM on Toronto (Shares outstanding: 33.3 million; Market cap: $10.0 million; www.athabascaminerals.com), operates the Susan Lake aggregate operation, one of Canada’s largest gravel pits, about 85 kilometres north of Fort McMurray. The company also holds permits for 480,244 acres around Fort McMurray. It believes this land could contain a variety of industrial raw materials, such as sand, gravel, silica sand, salt and limestone. In the three months ended June 30, 2015, Athabasca’s revenue fell 8.1%, to $3.3 million from $3.6 million a year earlier. It lost $763,146, or $0.023 a share, compared to a loss of $538,704, or $0.017....