As an investor with a very long-term time horizon, I love it when a company I am interested in posts underwhelming quarterly results that fail to meet analyst expectations. At times like these, when the pessimism of short-term traders and speculators leads to deep discounts on the share prices of great companies, I cannot help but gorge myself on stock. My primary challenge when I see shares trading 5-25% lower after an earnings miss is determining to what degree the short-term headwinds the company faced might impact their long-term business results.
One of the greatest advantages I have as an individual investor is my ability to leverage my long-term time horizon in order to take advantage of opportunities of temporary weakness in individual companies. A second key advantage is that I can be very overweight in a company without having to answer to investors, a Board, or shareholders if I think the situation represents a unique opportunity. With that perspective, I present my three most recent buy transactions.
1. Alaris Royalty (TSE: AD)
If you have five minutes, take a peak at Alaris's Q2 earnings news release and ask yourself if any item(s) merit a 20% drop in share price. Yes, there is some bad news relating to KMH, Limited Partnership, but KMH is only one of Alaris's 17 partners, and not even a material one. Instead, the numbers that jump out at me are 23% revenue growth, 7% dividend growth, and 6% CFO growth. My plan to hold my Alaris position in my taxable account instead of my RRSP came to fruition at a much cheaper price than I expected to pay.
2. Iron Mountain (NYSE: IRM)
Since you had five minutes to take a look through Alaris's Q2 earnings, you might have another five to browse Iron Mountain's Q2 results. If you do not feel like taking the time, I can summarize quickly: margin pressure from the Recall acquisition causes an earnings miss. Taking advantage of a 5%+ dip in share prices, I made two purchases in order to diversify my REIT holdings to include a sector I could not invest in through Canadian shares. This shareholder friendly company provides me with global diversification and a starting yield of over 5%.
3. Canadian Apartment Properties REIT (TSE: CAR.UN)
My plan to diversify my REIT holdings got another boost when Canadian Apartment Properties REIT ("CAR") reported Q2 results that missed analyst expectations. Regardless of what analysts expected, operating revenues up over 12%, a 98% occupancy rate, and a 60% net operating margin totally meet my expectations of a great company. Having lived in a CAR building a number of years ago, I have favorable impressions of management and love the cross-Canada geographic diversification of their properties. Re-establishing a position at a 4% distribution yield due to a 5% decline in share price felt like a no-brainer to me.
I am extremely happy with all three of my recent buys and look forward to capitalizing on similar opportunities in the future.
What was your most recent buy and what induced you to pull the trigger?
I like your call with CAR.UN. I'd love to load up in the coming months.ReplyDelete
Thanks Mark. I regret selling CAR about five years ago. Now I'll have it in my TFSA and grow the position over the long-term.Delete
I'm glad to see the great purchases this month! I'm currently following IRM but have not taken a position yet!ReplyDelete
Thanks for the words of encouragement. It took me almost a year of following IRM before initiating a position, so no rush! :)Delete
Mine were Flo Mrcc and Vod last week gave me 3 new positions now try to add to themReplyDelete
Congrats on your purchases. VOD is of particular interest to me. Best of luck!Delete
What are your thoughts about the recent short thesis that was published against Alaris? I feel this is also adding some unjust down pressure to the stock.ReplyDelete
I'll have to take a peak at the thesis when I have some time. Without having read it, my thoughts are you have to be pretty confident in yourself to short a monthly dividend payer yielding 7%. I prefer to look at the multi-year history of a stable revenue/net income/dividend growth, as opposed to focus on one investment that went bad. Safe to say that my time-horizon and investment objectives are vastly different from those of a short-seller.Delete