This is the update from Canadian investment newsletter Internet Wealth Builder on
Tim Hortons and Brookfield Asset Management.
Tim Hortons (TSX, NYSE: THI) Originally recommended on July 20/09 (IWB #2927) at C$28.88, US$25.91. Closed Friday at C$44.47, US$45.35.
When I last updated Tim Hortons in March (IWB #21110) I advised taking half profits. At the time the stock was trading at C$43.53, US$44.85. The share price slumped in early April, then briefly moved above the C$48 mark in May before retreating again. Right now, the stock is close to the same level it was trading at in March.
Two factors drove the price down. The first was a first-quarter financial report that fell short of analysts' expectations despite an increase of 10.4% in revenue to $643.5 million and a 7.5% gain in earnings per share, to $0.48. The results were negatively impacted by higher-than-expected redemptions in the company's 25th anniversary Roll Up the Rim to Win promotion, which cost Tim Hortons an estimated 1% in same-store sales growth in Canada.
The second development that shook investors was the sudden and unexpected departure of CEO Don Schroeder who had been with the company for more than 25 years. No reason was given - the press release simply said tersely that "Don Schroeder no longer serves as president and CEO of the Corporation". But Bay Street was buzzing with rumours ranging from a fight over compensation to an internal power struggle. Whatever the reason, Schroeder's departure leaves the company rudderless and scrambling to find a successor.
Action now: Hold. We'll allow the dust to settle before going back into this stock. Fortunately, we have already pocketed part gains of over 50%.
Brookfield Asset Management (TSX: BAM.A, NYSE: BAM)
Originally recommended on April 7/97 (IWB #9713) at C$6.13 (split-adjusted). Closed Friday at C$32.08, US$32.76.
Brookfield's first-quarter results were acceptable but not outstanding. The Toronto-based conglomerate, which focuses on property, infrastructure, and renewable power, reported reduced cash flow from operations of $218 million (excluding capital gains) compared to $230 million in the same period last year. (Brookfield reports in U.S. currency.) However, net income attributable to common shareholders increased to $278 million ($0.41 a share) from $164 million ($0.25 a share) last year.
"We continue to integrate the many investments we made over the past three years and operationally improve returns across our businesses, and we see strong organic growth opportunities across the company," commented CEO Bruce Flatt. "Our businesses are generating $4 billion of annual cash flow, and we are well positioned to enhance the performance of our existing portfolio and make new investments where we see value."
Action now: I am changing my guidance to Hold for now in anticipation of a flat to down market over the summer. - G.P.
Tim Hortons and Brookfield Asset Management.
Tim Hortons (TSX, NYSE: THI) Originally recommended on July 20/09 (IWB #2927) at C$28.88, US$25.91. Closed Friday at C$44.47, US$45.35.
When I last updated Tim Hortons in March (IWB #21110) I advised taking half profits. At the time the stock was trading at C$43.53, US$44.85. The share price slumped in early April, then briefly moved above the C$48 mark in May before retreating again. Right now, the stock is close to the same level it was trading at in March.
Two factors drove the price down. The first was a first-quarter financial report that fell short of analysts' expectations despite an increase of 10.4% in revenue to $643.5 million and a 7.5% gain in earnings per share, to $0.48. The results were negatively impacted by higher-than-expected redemptions in the company's 25th anniversary Roll Up the Rim to Win promotion, which cost Tim Hortons an estimated 1% in same-store sales growth in Canada.
The second development that shook investors was the sudden and unexpected departure of CEO Don Schroeder who had been with the company for more than 25 years. No reason was given - the press release simply said tersely that "Don Schroeder no longer serves as president and CEO of the Corporation". But Bay Street was buzzing with rumours ranging from a fight over compensation to an internal power struggle. Whatever the reason, Schroeder's departure leaves the company rudderless and scrambling to find a successor.
Action now: Hold. We'll allow the dust to settle before going back into this stock. Fortunately, we have already pocketed part gains of over 50%.
Brookfield Asset Management (TSX: BAM.A, NYSE: BAM)
Originally recommended on April 7/97 (IWB #9713) at C$6.13 (split-adjusted). Closed Friday at C$32.08, US$32.76.
Brookfield's first-quarter results were acceptable but not outstanding. The Toronto-based conglomerate, which focuses on property, infrastructure, and renewable power, reported reduced cash flow from operations of $218 million (excluding capital gains) compared to $230 million in the same period last year. (Brookfield reports in U.S. currency.) However, net income attributable to common shareholders increased to $278 million ($0.41 a share) from $164 million ($0.25 a share) last year.
"We continue to integrate the many investments we made over the past three years and operationally improve returns across our businesses, and we see strong organic growth opportunities across the company," commented CEO Bruce Flatt. "Our businesses are generating $4 billion of annual cash flow, and we are well positioned to enhance the performance of our existing portfolio and make new investments where we see value."
Action now: I am changing my guidance to Hold for now in anticipation of a flat to down market over the summer. - G.P.
