Ross Healey says sell????I feel compelled to offer a rebuttal to Ross Healey of Strategic Analysis Corp, who last night on BNN recommended investors sell CHRb. In a short comment, he basically said the stock has no "drivers" and has a low book value.
First, on the "driver" comment. I agree this is a low growth company, in a mature industry. However, the stock is currently yielding 14%. Canada 10-year bonds are at 2.5%. No growth required - the return is fantastic just as it is.
Second, on the book value issue. I understand that SAC uses a book value approach to screen stocks, but one must look deeper to understand the business. For example, Chorus is contractually protected against rising fuel costs, perhaps unlike any other airline in the world. Is that reflected in the book value? Also, Chorus has paid out most of its earnings as dividends/distributions since its inception. If it had not, it could have retained the cash and let it accumulate on the balance sheet (maybe earning 1% interest), or wasted it on fancy new offices, or other assets. This would have boosted the book value, but does that make the stock more attractive?
Give me a dividend anytime. It not only provides a steady return, but provides discipline to management, and almost eliminates the risk of major fraud. And every analyst covering this stock agrees the dividend is sustainable.
Funny enough, Mr Healey recommended (again) Yellow Pages. YLO is trading below book value, but look closer - it is all good will. YLO's tangible book value is negative. And what about the prospects - I am quite sure people will still be using regional airlines in Canada 10, 20, or 30 years from now. Yellow Pages?????