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Reitman's (TSX: RET.A)

Everyone knows Reitman's? The company offers with its multiple banners, fashion products "everyday" women. Moreover, comparisons advertising Reitman's vs. haute couture shows good positioning that the research enterprise. For those who

follow me for a bit, you will recall that I already commented on the company in financial crisis ( you can read the text here ). At the time I felt incredible to have access to a quality business and profitable despite the crisis that pays a dividend of 8% and is trading at a P / E less than 6.


Today the shares trade higher with a dividend rate of 4.5% (the dividend dollar was even increased) and a P / E of 13.3x (based on 12 months). This valuation is less attractive than in November 2008 but still remains extremely interesting title. One problem I see with this title is that historically it has always traded at multiples lower. We should therefore not be seen to compromise a multiple P / E higher than 15x in my opinion.

Reitman's is a cyclical basis to be negatively affected if the economy slowed down or back into recession. Conversely, the title will benefit from renewed strength in the economy. The company is also affected by the change in the Canadian dollar versus the U.S. dollar. Indeed, Reitman's buys its inventory primarily in U.S. dollars while these sales are in Canadian dollars. The company could use derivatives to hedge its exposure to currency risk, but always decided not to do so. Personally, I think it's a good decision. However this risk exists and I decided to check the figures for the order of magnitude of impact. By my calculations, Reitman's increasing its quarterly net earnings of $ 0.01 per cent currency appreciation.

Reitman's is a well managed, low debt (a mortgage of only $ 10M to $ 655M in assets) and with some development projects underway. If Reitman's should not open new banner (adventure Cassis was relatively painful at first), the company seeks to acquire small independent stores and convert them to existing banners. Reitman's has the cash ($ 200M in current assets) and debt capacity for such acquisitions. The buying opportunities are rare and the company may need to focus on organic growth for some time.

Ultimately, Reitman's seen as a quality title that can be purchased at an attractive price.

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Select a good investment

First, let me say I am happy to revive this blog. My professional duties have changed Recently, I am no longer required to limit my comments on current economic way too harsh. But I keep some reserve duty to avoid any appearance of ethical conflict with my new job.

During this fall, I noticed that several people were a little lost in the maze of information available and equities. How to select the best company among the thousands available? If my memory is correct, according to Bloomberg, there are approximately 60,000 public companies on the planet. How to select the one that should be in your portfolio? By doing a screening of these companies with important factors for you, we can reduce that number to fewer than a hundred often.

The first step, the one that best reduces the size of your investment universe is limited to research grants that your broker gives you access. We could translate this by the question "What can I buy?". For my part, I have access to all Canadian and U.S. exchanges. With this criterion, your world becomes less than 20 000 enterprises.

In second stage, the question arises "What I want to buy?". Access to 20,000 titles is one thing, but at least half do not meet your minimum criteria (if you're a serious investor). In this category, I wonder what are the characteristics of an action that would make me uncomfortable. The best answer I've found so far is:

• to be traded on a regulated market (so exit the pink sheets and other OTC)
• Must have income
• Must have a market capitalization of more than $ 50M

With these three criteria, we reduce the sample to more or less 2,000 companies. That said, you can also have your own criteria. For example, someone could want a profitable business over the past 3 years and capitalization of over $ 250M. Others may require that the company is part of a stock index, etc..

The third step for the recovery of title and business ratios. Some people will never want to invest in a company heavily in debt. Others will want to watch the P / E ratios, P / B or other. For my part, I often look at the P / E, ratio and ROE.

I want to say that necessarily, some companies that would pay good investment could disappear from your investment universe after a complete screening. For example, if you require an ROE of 15% minimum and a company has made 14% this year, but 25% the previous four years, your screening does not come out this result. To avoid this, just be a little more conservative on the search criteria. ***

Bloomberg is a great way to make that screen. For those who do not have this tool, Google Finance offers a form of screening tool . It is more limited, but still a good tool.