RE:RE:RE:RE:RE:RE:RE:HCG Equity Lender selling at 50% off!I would like to say thank you to both Northforce13 and canader for sharing both facts and opinions. Please, do not take this forum too personally or it will devolve into something that will not benefit anyone (for e.g. see Altagas forum, ticker ALA). I know that owning HCG and some other stocks have been quite frustrating but there is no reason for ad hominem attacks.
I come to bullboard to learn more about my holdings and investing in general. My background is also not in finance and I know very little about stock market. I have owned HCG since 2014/2015 (ie when it was in the 50s) and bought it as one of my first investments when I first opened my TFSA account in RBC. At that point, I liked its high ROE in the mid 20s, per share EPS growth, high margin, no shareholder dilution, little payout (ie most profits reinvested by company for more growth), modest valuation (there were only much more expensive software companies with similar metrics), and the fact that it was owned by highly regarded investors/mutual funds (like Mawer New Canada Fund). I have been trying to buy it on the way down whenever I had room in my TFSA every January (last time I bought more was in 2019). I have never sold HCG shares. I do not know how to trade, when is the right level to buy or sell, and the 9.95 for each transaction is quite prohibitive for me to do any transactions more than every few months (it takes this long for me to save 1-2k dollars from work to be able to justify paying the brokerage fees).
I have posted complementary information about EQB on the HCG board since I believe it was relevant and helpful to other readers. EQB has a very similar business model with a different management team, who can provide us with another perspective and additional details about the same opportunities and challenges faced by HCG. I have also found EQB investor relations much more approacheable, thorough, and responsive. I was able to get my questions answered and even spoke on a phone with the CFO a couple of times in the past. HCG would not even bother respoding or responded with some lame black out or travel excuse several weeks after I contacted their IR. Until recently, EQB always had worse metrics (mid to high teen ROE) and that is why I didn't like them as much. However, since I had and currently have no more TFSA contribution room and I did not want to put all my eggs in one basket, I bought EQB shares in my non-registered account as a proxy for HCG with whatever little remaining money I had. Last winter, HCG and EQB were my two biggest holdings and currently are my second and third biggest holdings even after the ~50% collapse. Now I am just about break even on HCG and mid teen underwater on EQB.
[I also have a completely unfounded conspiracy theory that hedge funds go long EQB (or big banks) and short HCG as insurance. HCG does not pay dividend and has traditionally been viewed as more of a risk taker plus all the chickenfarmer conspiracy, low easily manipulated volumes, etc. So if we would see some strange divergence and I will have TFSA room, I could then sell my EQB non-registered position to buy more HCG in my TFSA.]
I do not mind if the share price remains lower for the foreseeable future for both HCG and EQB. The cheaper they will be, the greater value we will receive on buybacks when they will eventually resume. In the meantime, the management should focus on increasing profitability and growing their business. As long the per share metrics keep growing and improving, the price will eventually follow. I also have not reached my long-term full position even though I am overweight on both for the size of my current portfolio. Unfortunately, I did not have any money this March to buy anything on the stock market. Since then, however, I have been diligently collecting IOUs and saving as much as I can and now have almost 8% of my portfolio in cash. I am waiting for another correction now. If we might go into another recession [as seen in Germany and most of Europe already], I would imagine that we should see much deeper correction across the market than what we have seen. Most quality stocks [like software] did not go down even to levels seen in winter 2018 sell off and many are even more expensive now than they were in January. The 2018 sell-off was a non-event compared to the current global pandemic and many issues like leverage have even worsened now than before. Ideally, I am also hoping to be able to shift into higher quality names with more trustworthy management once I will break even on my existing holdings. I have lost confidnece in some companies I own after I had more time to look into their background and numbers. I hope HCG will not become one of them and that the IT investments with future buybacks will restore its historical margins and ROE.
Have a wonderful weekend everyone [it is snowing/raining here and I am at work so hopefully you have a better time]!