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Obviously auto industry sales have slowed, but this slide is incredible. Essentially down 15% in the past 5 days and almost 30% in the past month.
 

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There was an article in the G&M yesterday talking about how ACQ is "too cheap to be ignored". That's exactly what I said! Even Veritas Investment thinks it's a buy.
 

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I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are four factors that scare me at this time.

1) its recent equity at really low price,
2) its really high debt ratio
3) its very thin margin
4) its not very attractive cash flow.

Maybe all I mentioned are expected in this fast growing company. I am not too familiar with the industry. Can anyone shed some lights on this one as to why it is an attractive buy for me?
 

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I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are five factors that scare me at this time.

1) its recent equity at really low price,
2) its really high debt ratio
3) its very thin margin
4) its not very attractive cash flow.

Maybe all I mentioned are expected in this fast growing company. I am not too familiar with the industry. Can anyone shed some lights on this one as to why it is an attractive buy for me?
Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.

I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.
 

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Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.

I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.
I understand now. Learned another lesson here. Pluto, probably I shouldn't ask under AutoCanada section but what investments do you have, what investments are you interested in lately and why?
 

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I am still hesitating on this one. I love the fact that the stock has dropped a lot which makes a very tempting stock but there are four factors that scare me at this time.
I'm not sure I follow your concerns.

1) its recent equity at really low price,
The equity issue was announced in Q4 at $25.50/share. The shares are currently trading at $18.50/share. If you consider the equity issue to be a low price, what would you consider the current price? Wouldn't you like to buy shares at 28% below a low price?

2) its really high debt ratio
Which debt ratio are you referring to? What would be a preferrable level? Have you factored in the $75 million increase in assets (with no corresponding increase in liabilities) from their Q4 equity raise?

3) its very thin margin
Gross margins are 16.3% so far in 2016. What level of margin would you be comfortable with?

4) its not very attractive cash flow.
Their 12 month trailing free cash flow is $69 million. How much free cash flow do you expect them to generate?
 

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Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.

I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.
GM's guidance for 2016 was recently raised, along with the dividend and the buyback program.

I think their is a disconnect between what the market is anticipating and what is happening. It's a mistake to see equity prices as some sort of crystal ball. The market has predicted 27 of 11 recessions.
 

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Its way too early to buy this one. Auto stocks tend to peak and go into decline as sales are booming. Look at charts of F, GM, MG etc. all the stocks are weak even as sales are booming. Happens every cycle. If you use the fundamentals to time ones like this, you have to be contrarian. Buy when the fundamentals are crappy. Sell when sales are booming and the stock price trend breaks down.

I get the feeling buyers of this stock now will live to regret it. Stocks like this, as in airlines, are not investments, they are trades. One is better off to wait for a clear bottom and upward momentum before attempting a trade.
how will you know that it's a clear bottom ? when stock goes back to $40?
 

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No discussion on this stock for a while. It was hotly discussed as it was rocketing higher a few years ago but it's done quite poorly since then. Currently down 85% from its peak price in 2014.

Curious what people think? I'll offer a quick observation from technical analysis. It's generally a bad sign when a stock fails to stay above its 200 day moving average, so I'm seeing bearish price action. Here's a chart: http://schrts.co/IknfxvTj
 

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I'll offer a quick observation from technical analysis. It's generally a bad sign when a stock fails to stay above its 200 day moving average, so I'm seeing bearish price action. Here's a chart: http://schrts.co/IknfxvTj
Hey James, I don't know anything about technical analysis... but isn't the 200 day moving average like the thing that's been around forever and quoted by stock market followers as a potentially good indicator of stocks? How could this possibly hold any relevance in today's world of advanced computerized trading and an army of 100,000 150+ IQ genius quants in New York trying to take our money 24/7? Surely the effectiveness of the 200 day moving average went out with the sliderule and graphing stocks with pencils on grid paper, no?

Also, I wish I never heard of this cursed ACQ! My ACB is in the high 20s and I thought I was getting a good deal at the time...
 

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They seem to have mismanaged the business quite well. Also, I think the auto cycle is probably started its slow decline. The good news with ACQ, is that they also have the repair business that should keep the cash flow going, even in bad times, but I am not sure it alone would keep the stock price above $11. It should keep it from bankruptcy and it should support the dividend.

The US acquisition was probably a bad idea, like almost all US acquisitions are. That said, Auto dealerships are kind of a legalized crime story, if you ask me. As long as people keep coming in for cars, they are allowed to rob and steal from them, without recourse. Many people give them access to their wallets, a lot more frequently now then in the older days, so I have no doubt this company will trade higher at some point, but that day may not be in 2019. Slower auto sales will provide for cheaper dealership acquisitions in the future, and they are pretty cheap and abundant even now.

Not sure what to recommend here, so everyone is on their own. Good luck.
 
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