National Post

Five stocks that make me shake my head

Weird events keep the market more interestin­g

- Peter Hodson Peter Hodson, CFA, is CEO of 5i Research Inc., an independen­t research network providing conflict- free advice to individual investors.

From time to time, I try to engage my kids in discussion­s about investing and the stock market. For example, if we are at Tim Hortons, I explain to them how it was purchased by the U. S. holding company which owns Burger King. During our recent roller coaster trip to California, I explained that they could buy shares in a roller coaster park company, Six Flags Entertainm­ent Corp. and earn a four per cent dividend while they save for university.

But, sometimes, the stock market is just too weird to explain. Even for me, with 40 years- plus now of investing experience, I still shake my head at some of the goingson with companies, investors and the market. Let’s take a look at five weird events over the past few months:


Wins is a Chinese company in the financial services business. It is now a $ 1.2- billion company, but in February was worth nearly $8 billion. That’s not the weird part. Its 52-week price range is $ 10.34 per share to $ 465 per share. That’s not it, either. Nope, the strange part is, accordingl­y to a flurry of recent lawsuits, Wins set up a U. S. head office address just to gain inclusion into U. S. indexes (which it did). The index inclusion set off a wave of buying from U. S. index players on an unknown Chinese company. Index committees have to be agnostic, and have to follow their rules. With its U. S. “head office,” Wins was granted inclusion into several indexes. Now, though, with a plunging share price (down 67 per cent this year), the jig might be up. Even with its current $ 1- billionplu­s market cap, the company only had $20 million in net revenue last year.


Home Capital went through the 2008/ 09 financial crisis just fine. In fact, during those years it increased its earnings per share and also increased its dividend. This week, though, none of that mattered, nor did its 10- year- plus history of strong performanc­e, as it experience­d a good oldfashion­ed run on its banking subsidiari­es, which resulted in it needing to find some very expensive funding to replace fleeing deposits. Sure, executives of the company made some serious judgment errors, and there is an OSC investigat­ion ongoing, but recent problems for the company all seem to have started with a short attack by Mark Cohodes — a chicken farmer. So HCG survives Lehman Brothers and a worldwide financial collapse, only to be humbled and hobbled by a single farmer.


Mag is a Canadian- based magnesium/ potash com- pany, formerly listed in Toronto ( delisted in August, 2015, for failing to meet listing requiremen­ts and now selling as MAAFF on the over- the- counter market in the U. S.). With an $ 11- million market cap, it is largely ignored now. Except for one recent glorious day in the sun: On March 24, the stock price rose 32,043 per cent. That’s right. From a price of $ 0.0018 per share on March 22, Mag shares rose to $0.90 per share on March 24, on volume of 10 million shares. What caused this spike? Pretty much nothing from the company. Trading looks to be a perfect example of a “pump and dump” scheme on t he over- t he- counter market, known to be so bad for investors that U. S. regulators actually use a skull and crossbones l ogo on some companies so investors know what they are getting into. After its meteoric rise, it took Mag shares all of three days to go from $ 0.90 per share back to below one cent per share.


Canadian health care investors, rightly so, have been nervous following the giant collapses of two of the biggest companies in the sector, Valeant and Concordia. So, last week when there was a rumoured short report on CRH, investors didn’t wait long to panic. CRH shares, which were $ 12.35 on April 20, and at all- time highs, plunged to $7.56 per share the very next day. The whole thesis of the short report, which most investors haven’t even seen, was that margins and CRH’s payer relationsh­ips need to be watched. Well, anyone investing in the health care sector should know this already. Government­s are always trying to lower costs. While the report was fairly well- written ( unlike many short “attacks”) there is nothing in the report that should be any news to any long investor in the company. Thursday the company reported solid earnings, and the stock is up 25 per cent this year, but it might still take CRH some time to recover from this incident.


Lumenpulse is a mid- cap LED company, which went public at $ 16 per share in 2014. After a couple of years of missing 50 per cent of its earnings forecasts, no one cared much about the stock, and it was down 38 per cent year- to- date as of Wednesday. Apparently, though, insiders still liked it, and on Thursday the founders announced plans to take it private at $ 21.25 per share, an 85- per- cent premium. Nice for shareholde­rs, sure, but we have insiders taking the company public at $ 16, only to buy it all back almost exactly three years later at $21.25. Oh, and during those three years the company only made about $ 0.70 per share in earnings. Go figure.

Of course, the weird stuff makes the market much more interestin­g, and, occasional­ly, more profitable.

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