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I made close to a 10 bagger on this stock. However, that was with Pat Priestner at the helm and the company was performing extremely well. Unfortunately, that is no longer the case. Sometimes I come back to a stock a few years later if the price falls and fundamentals haven't changed, but they look changed to me. The dealerships they have acquired are not performing well, especially in the US. The company is losing money on an adjusted basis. With dealerships spread out all over the place in both countries, it is difficult to see a path back to success. Pat Priestner will probably pick up some of these dealerships at 50 cents on the dollar when they are eventually sold and turn them around on his own.
 

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I check back on this one once in a while. Just because at one stage it was such a hot story here. I felt like I was missing out and really wanted to get in on the action.

For this I just decided to sit on the sidelines. There is no moat to this industry. Barely a barrier to entry so I failed to see how it could continue to clime.
When I see auto sites advertising 8 year finance terms it worries me so I wonder about the state of the industry. Let alone it appeared to simply be a story of growth by aquisition. Too much too quickly never seems to end especially well. You see dealers everywhere so whats the competitive advantage?

For those reasons the story to me was too good to be true and now with the fears of an economic slow down the last thing people will be doing imo is taking on more debt to buy newer vehicles.
 

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I check back on this one once in a while. Just because at one stage it was such a hot story here. I felt like I was missing out and really wanted to get in on the action.

For this I just decided to sit on the sidelines. There is no moat to this industry. Barely a barrier to entry so I failed to see how it could continue to clime.
When I see auto sites advertising 8 year finance terms it worries me so I wonder about the state of the industry. Let alone it appeared to simply be a story of growth by aquisition. Too much too quickly never seems to end especially well. You see dealers everywhere so whats the competitive advantage?

For those reasons the story to me was too good to be true and now with the fears of an economic slow down the last thing people will be doing imo is taking on more debt to buy newer vehicles.

Excellent points. One needs to remember, however, that cars do not last forever and to keep them lasting a long time they need to be repaired. None of that is exclusive to ACQ but they are certainly not excluded from it either.

Everything comes down to what is it all worth. I doubt you will buy it today and be glad you did in 6 months, but with that said, if one waits to buy it, what will you need to see to buy it and when you see it, at what share price will you be required to pay. It's a much better deal today at $11 then it was at $96, but I actually got to buy some during the credit crises in the $3 range, so what does any of that say. Not much.

Good luck is about all one can say. I think we and the entire market understands where this one sits and it has probably been appropriately priced...at least until Monday. lol.
 

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I bought this one 7 months ago because it had low P/B and P/S ratios, and was making money. So far I'm up 15%, so it's working out so far. My method says not to buy anything that lost money in the past quarter, so it would not be a buy for me today, given their disastrous last quarter. I am holding them for now and we'll see what happens.
 

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Not sure if anyone noticed this:

https://web.tmxmoney.com/article.php?newsid=8359178124672409&qm_symbol=ACQ

Above and beyond ACQs business value they also own some of the most valuable real estate locations in some of our largest city centres. They just sold 2 properties to AutoReit for $24 million dollars. I think at last count they own 61 dealerships.

Not bad for a company the market values at less then $300 million...oh yeah, and they also sell cars and repair them as well.
 

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Not sure if anyone noticed this:

https://web.tmxmoney.com/article.php?newsid=8359178124672409&qm_symbol=ACQ

Above and beyond ACQs business value they also own some of the most valuable real estate locations in some of our largest city centres. They just sold 2 properties to AutoReit for $24 million dollars. I think at last count they own 61 dealerships.

Not bad for a company the market values at less then $300 million...oh yeah, and they also sell cars and repair them as well.
Interesting. This trades at price to sales of 0.1. Even the most hated company in Canada BBD.B trades at 0.3.
 

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I am surprised that someone has not thought about taking a car dealership property, that is sitting in the middle of a large city, where real estate prices are soaring, and simply build condos or office buildings above it.

I mean, as long as the auto dealership promises to turn off that annoying paging speaker system that blasts way too loudly throughout the parking lot, I am sure people would not care that they live above them. Just make the ground floor the auto dealership and now the entire parking lot is a showroom. No snow to shovel off the cars, or rain to keep customers away. The rain would just keep the customers away from your competitors parking lot, that did not have a huge condo complex above them.

Anyway, someday they will think of it, but in Toronto and Vancouver, where housing supply is constrained, why don't they do this type of thing? I mean these properties are huge.
 

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Interesting. This trades at price to sales of 0.1. Even the most hated company in Canada BBD.B trades at 0.3.
It doesn't matter if it trades at a price to sales ratio of 0.01 if they are structurally losing money. It may actually be a sign the company is in danger of recapitalization. They bought a lot of dealerships and haven't figured out how to generate a (good/any) return on capital. On a turnaround, ACQ could absolutely explode, similar to other acquisition-based retail store companies like Boyd or a ATD.B. But...no turnaround in sight yet.

They have a lot of good real estate, but they've already sold off 8 of them, and it hasn't helped yet. They must turn around operations at existing dealerships, especially in the US, if the stock is to do well.
 

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It doesn't matter if it trades at a price to sales ratio of 0.01 if they are structurally losing money. It may actually be a sign the company is in danger of recapitalization. They bought a lot of dealerships and haven't figured out how to generate a (good/any) return on capital. On a turnaround, ACQ could absolutely explode, similar to other acquisition-based retail store companies like Boyd or a ATD.B. But...no turnaround in sight yet.

They have a lot of good real estate, but they've already sold off 8 of them, and it hasn't helped yet. They must turn around operations at existing dealerships, especially in the US, if the stock is to do well.
Sure, but P/S of 0.1 + brains often equals exceptional return 5 years out. See BBD.B, OSB for recent examples. I have a full plate with my investing activities now so not personally investigating, but I stand by "interesting".
 

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Sure, but P/S of 0.1 + brains often equals exceptional return 5 years out. See BBD.B, OSB for recent examples. I have a full plate with my investing activities now so not personally investigating, but I stand by "interesting".
That is exactly it. There is a big difference in the opportunity between a company that is currently losing money that trades at 0.1 x sales and another company that is losing money that trades at 10 x sales. The risks in the two are about the same but the rewards are considerably different.

Obviously if it continues to lose money, it will most likely turn into a bad investment. No one should debate that reality. I hope no one debates that once it proves it is not going to lose money, the stock will be trading at a lot higher price then it is today. So the question really is, can ACQ turn things around? To benefit, one needs to answer this question before it actually happens, since the stock will begin to rise long before we see its recovery, as all stocks do in these situations.

I don't see any fundamental reason why ACQ dealerships are somehow more uncompetitive then any other dealership. Most dealerships are literally a license to steal money, so I suspect that they had a senior management group running things on autopilot, and the business got away from itself. A more capable management group should be able to change that but it will not happen in one quarter. In the mean time, one can be pretty sure bankruptcy is not in the cards, because it appears that the land value of the dealerships is worth more then the debt they owe. Bankruptcy only comes to those who cannot pay off their debt. So we now know they will most likely have the time to recover. Their business is not going away. Even for the idiots that think cars can be bought online, they could do that more effectively then others and sell their dealerships to Condo developers if that ever became a reality, which I doubt. So they will get the time to recover. Investors will get the dividend while they wait and when the recovery happens, the only question arises is what Price to Sales should the stock trade at now that it is making money.

We are not talking about 10% or 20% or even 50% gains. The new share price number, most definitely, will be a few multiples higher at least, then 0.1x, which means we are actually talking about 100%, 200% or even 500% gains. As Hboy said, even if it takes 5 years, those are outstanding returns...plus you get a dividend while you wait.
 

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I think Optsy has it nailed down.

Personally, I see tremendous value here. The largest worry of course is that for the last two quarters, they have posted a loss. Is that good? Obviously not. But if you take a look at the revenue generated, it's not as if the revenue is falling hard. In fact, even though they lost money in the last two quarters, they beat revenue expectations for both those quarters. Revenue appears to be steady, at least. It is not in decline.

So what does this mean? Debt. Borrowing. Expenses of some or all kinds are contributing to losses on the bottom line.

But let's face it - it has a huge chance of recovery. The stock price could still decline into single digits if they keep posting losses, but like Optsy said... The FV on this stock could easily be over 100% from current price.

They've taken on more than they can handle. But that's not always a bad thing. I would bet they can turn it around.

Lastly, the auto industry and being cyclical and yadda yadda... I don't even factor that into my purchasing. Why? Because that affects everyone. It's not related to ACQ as an individual issue.

You'd almost be foolish to not consider purchasing a company making the same revenue they did when they were $80+ and are now only $10.

Yes, there are issues. But if those issues get solved? Boom.
 

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AutoCanada did it again. This time they sold the land under 3 dealerships to Automotive Properties REIT for $30.4 Million dollars. You may recall back in April they did the same thing, but the price was $24 million for 2 dealerships. The point here is that AutoCanada owns 66 dealerships. If you assume they could sell this real estate for $10 million per dealership, that adds over $600 million dollars to their valuation.

Currently the stock market thinks this company is only worth $300 million. Even when you add $300 million of debt you can't help but notice that the stock market has valued their Auto Sales business, their Auto Repair business and their Auto Finance business at about $0 value, and as I said they own 66 of them.

https://web.tmxmoney.com/article.php?newsid=7256457793394539&qm_symbol=ACQ

It appears investors are slowly tripping on to this abnormality, but I am surprised how slow sophisticated investors can be.
 

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If you assume they could sell this real estate for $10 million per dealership, that adds over $600 million dollars to their valuation.
I have not examined the company, but this seems like a huge assumption. If in need of ready cash, might ACQ be selling its best real estate first?
The news release does not say where the dealerships were located. But I would not expect land in, say, Timmins to be as valuable as land in Mississauga.
 

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I have not examined the company, but this seems like a huge assumption. If in need of ready cash, might ACQ be selling its best real estate first?
The news release does not say where the dealerships were located. But I would not expect land in, say, Timmins to be as valuable as land in Mississauga.
By no means are my numbers offered with any level of precision. They might even rent a few already, who knows, although I doubt it, except the 2 they sold in April. If we were adding $100 million to their value, much more precision would be required, but we are adding some number in the $500M to $600M level. I am sure you have driven through enough cities to see the size of these dealerships and for many, the sweetness of their locations. It is certainly more then a few million each, in any case. It's enough land to build multiple condo's, shopping malls, office buildings and still park most those people's cars.

Personally I think their current dealership business is worth a large amount more then the $12 per share the stock market is asking today and in fact, it is this real estate that is being thrown in for free. I suspect most are owned by ACQ because entities like Automotive REIT just did not exist when most of these dealerships were formed, and I suspect other real estate investors would have shied away from managing this type of property.

Anyway, it seems that investors are starting to become aware of this but understand that it will inevitably be the auto business performance that will move the stock. Currently investors are concerned about the point in cycle we are in, with respect to auto sales, hence why the jump in price on these announcements, tends to fizzle out a few days later . I don't disagree with them, but know that the repair business is their to cushion a down cycle in auto's, and cars just don't last forever. This buying cycle always comes back.

What I like about this real estate situation, is this. I suspect the real estate is probably worth as much as the auto business, at least in the larger metro areas, like Toronto, Calgary, Edmonton, etc. If they can sell all their land, they can effectively buy almost twice as many dealerships, with the proceeds. Let's say 50% more to be conservative. What will those investors, who are anchoring on the Auto Business alone think, when ACQ has not 66 dealerships, but 99 dealerships. Most bought during the down cycle in auto's, but now start to see a resurgence in sales. Think of the new income statement. Think of the cash flow statement and think of the new balance sheet...and then ask the all important question:

What would the stock price be then. Perhaps 5 years from today, probably less. Even if it is only $24, it is a great return in 5 years, especially when the dividend is added to it. I suspect you would be seeing a number north of $50, but it is not needed to make this a good idea. What is needed is a person willing to wait 5 years and collect a 3.3% dividend while living with the ups and downs of the daily drama, stocks always want to provide.
 

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HBC is another stock with real estate holdings worth more than the company. However, that hasn't stopped it from being a poor investment. Autocanada is more than likely to sell its real estate to continue operating at a net loss. This doesn't mean you'll see any of this value. And every time they sell a dealership, their already small net margins decrease as that NOI heads to the REIT.
 

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ACQ coming back hard - Up 6x since the March low and 2x since just before Corona crash.

Glad I held on still, but, hasn't been worth it ...only a bit above my ACB at this point.
 

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Who would have thought that everyone, all at once, would decide that they really do not want to ride the bus anymore?

Anyway, in our society, cars and their repair, are about as important to us as food and liquor. People may delay the purchase of a new car or truck, but they just never seem to ever forgo it. In the car sales industry, a few bad quarters, in the past, just predict a few blow out quarters to come in the future.

The added plus in this particular business is that at the bottom in March, their real estate holdings would have been worth 2 times the price of their stock. Ever wonder what the land is worth, that all those cars are parked on at those dealerships situated in the middle of some of our largest cities?
 

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ACQ has definitely been killing it. The pandemic has been a savior as their margins have soared because people are buying bigger vehicles.

Ever wonder where the stock would be if they didn't dump $110M cash (1/3 of current book value) into money-losing US dealerships? That is what really forced them to sell all that real estate which will lower their margins in a more normalized environment. Maybe they turn it around. It's a competitive environment though.
 

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Tough to say about the US dealerships. Not sure why they went there but it was a mistake. They seem to have dealt with it for the most part. If they gave it more time there are certainly enough Canadian dealerships to fill their growth needs but everyone always wants to be in the US.

Anyway, the good thing about the stock market is it discounts corporate wins and losses very quickly so you can pretty much look forward every new trading day. The plus is, If you had never bought a bad car dealership, in the past, will you really know what to avoid when you are buying more of them in the future? AutoCanada is a long term story. Plenty of growth acquisitions for them, that are usually priced accretively, right from day one. Not quite the slam dunk it was in March when the share price was in the $5 range. The value of their real estate holdings is worth something close to $12 per share. That was kind of taking money from a baby. At $29 per share it is probably reaching fair value, but it should be able to grow its earnings substantially for a long time to come, so I would think that not long into the future, $29 will seem like quite a bargain, as well. Just have to give it time.
 
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