A humorous look at the companies that caught our eye, for better or worse, this week.
Short sellers, God love ‘em, aren’t much for moderation. In a report titled, Falling Out of Orbit to Zero, U.S.-based short-selling firm Spruce Point Capital Management targeted Maxar, the satellite and imaging company formerly known as MacDonald, Dettwiler and Associates. Using typical activist short-seller invective, the Spruce Point report accused Maxar of using dubious accounting to cover up financial strains, calling the company a “ticking time bomb.” And after weighing all of the financial variables and the company’s prospects, the firm arrived at a long-term price target of $0.
Canada’s auto-parts manufacturers find themselves among the casualties of U.S. President Donald Trump, a burgeoning list that also includes the Turkish lira, Mexico, free trade, the Western alliance, U.S. credibility worldwide and basic human decency. This week, Magna lowered its expectations for the rest of the year as tariffs on steel and aluminum elevate the company’s costs, while potential new tariffs on vehicles and parts loom over the industry. The outlook, according to Magna CEO Don Walker, which serves as a good tagline for the times – “anybody’s best guess.”
CI Financial (Dog)
CI made its case to investors for a strategic reduction of its dividend. As management put it, an unusually low valuation has made buying the company’s own stock highly attractive as a use of free cash flow. So CI is changing up its capital allocation approach to start plowing money into share repurchases, which currently make more sense than dividends for both the company and its shareholders. Thus, the dividend cut. But investors only heard this: "Something something something DIVIDEND CUT!”
Remember Cool Runnings, the movie based on the Jamaican bobsleigh team at the 1988 Winter Games in Calgary? Sure, the unlikely Olympians were “stars” for a week or so, in a feel-good, deep-underdog sense. But they had to push their sled across the finish line after crashing and ended up dead last. Similarly, recent underdog Cineplex had a decent week in the making topped off with an earnings beat on Friday, but limped across the finish line in afternoon trading to end the week just a few cents higher. We’ll applaud the heart-warming effort, calling it a star with an asterisk.
Chipotle’s stock has been hotter than a habanero enchilada this year, as short positions have come off the stock following a disastrous two years. Up by nearly 70 per cent so far this year, the stock extended its run through this week. If only Chipotle could stop making people sick. In late July, more than 600 people fell ill after eating at an Ohio Chipotle restaurant, resurrecting the food-borne illness fears that crushed the stock in the first place.