5 Canadian Companies With Unusually Large Buybacks

In Canada, a substantial issuer bid (SIB) is the formal term for a tender offer to repurchase shares. SIBs can be used to buy back an unusually large amount of shares beyond what’s allowed with a typical NCIB buyback program (Normal Course Issuer Bid). Tender offers may be a sign of improving corporate governance or savvy management taking advantage of their stock’s undervaluation. Or, large buybacks might simply be misleading demonstrations of confidence in a company’s prospects.

We’ve compiled a cheat sheet of Canadian stocks that are in the process of buying back a substantial portion of their float. We looked at the past 3 months of filings to find stocks that are:

  • In the process of a SIB
  • Have completed a SIB and continue to repurchase shares

The market capitalizations of the 5 stocks we’ve found range from C$133M to C$3,186M, so there should be a reasonable amount of liquidity for the largest stocks in this group. Without further ado, here’s our cheat sheet…

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Introducing the Sentieo Trump Tracker: Follow The President’s Impact on Your Investments

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Today, we are excited to introduce the Trump Tracker. It’s a bot that constantly scans new public financial documents for mentions of President Trump. These documents include all SEC filings, conference call transcripts, investor presentations, press releases, and more. The bot instantly surfaces new mentions of Trump as soon as they’re published, while intelligent queries automatically sort them into topics like Obamacare, Mexico, and NAFTA.

Anyone interested in following the administration’s impact on public companies can engage with the Trump Tracker by checking the dedicated website, following the @trumptrackerbot Twitter account, or signing up for a daily email alert on the site.

The Trump Administration is Now a Stated Risk Factor for Public Companies

When we last wrote about the Trump administration at the end of January, we noted that the markets paid six times as much attention to the new president’s policies as compared to those of President Obama over a comparable time period. Sixty days after President Trump moved into the White House, we see that trend continuing.

The number of regulatory filings mentioning President Trump sharply increased after Inauguration Day on January 20th. We measure a total of over 1750 filings mentioning President Trump from January 20th through March 22nd, 939 of which are SEC documents.

There is a significant change in the tenor of those mentions as well. We see references to President Trump shifting from high-level comments to more formal statements in the “Risk Factors” disclosure sections of SEC filings. Overall, 60% of references to President Trump within SEC filings are in the “Risk Factors” section. This is a substantial increase from the less than 15% we observed during the presidential campaign. This trend is even more pronounced in the healthcare industry, where we find that 85% of mentions since Inauguration Day were contained in these sections.

This shift is illustrated in the graph below:

Each bubble in the above graph represents an industry, while the size of each bubble corresponds to the number of SEC filings mentioning President Trump in that industry. The higher the bubble, the larger the share of those mentions present within “Risk Factors” sections. The dotted line, meanwhile, represents the average share of Trump mentions within “Risk Factors” sections across the market.

As you can see, both the number of mentions and the share of those mentions contained within “Risk Factors” sections has increased significantly since Inauguration Day.

In the months preceding President Trump’s inauguration, only about 15% of mentions were contained in “Risk Factors.” Over the past two months, that number has increased to 60%.

In total, Trump has already been mentioned in the “Risk Factors” sections of 10% of all 10Ks filed across all industries since January 20th.

Why are Tech and Consumer Discretionary so quiet?

We are surprised to find that only 4% of technology companies’ 10Ks and 10Qs filed since January 20th mention Trump at all. Likewise, in the Consumer Discretionary category, only 4% mention Trump.

These industries are reliant on overseas manufacturing and foreign workers, both of which are threatened by the President’s stated policies. We would have expected therefore to see a larger share of cautionary statements. These results therefore leave us wondering if management teams are rightfully dismissive or if they are hiding their heads in the sand?

Big Topics, Little Attention

Some prominent topics are largely absent from filings despite having been flagged repeatedly by market participants as a high risk. These include:

  • The Wall: We found only one SEC filing referring to Trump’s wall on the Mexican border.
  • Immigration and H-1B Visas: This is a key issue for many tech companies but also several other industries from Agriculture to anything with a high-street. H-1B visas are not mentioned at all, and Immigration in general is mentioned in only three SEC filings since January 20th.
  • NAFTA: Though Trump has threatened to renegotiate NAFTA, which could threaten American agriculture and associated industries, we find only eight mentions of the topic in SEC filings since January 20th.

Below is a summary table with the results for several key recurring themes of President Trump:

Source: Sentieo Document Search

Methodology

The Trump Tracker is built on top of Sentieo’s powerful financial document search and keyword alert engine. The Bot is constantly scanning through over 9 million financial documents that include SEC filings, conference call transcripts, investor presentations and press releases.

To generate the alerts, we built a series of complex queries that search for the word “Trump” in the proximity to other keywords. In most of these queries we also automatically filter out mentions of some of Trump’s businesses so that our alerts are more focused on real mentions of President Trump. However, the Trump’s Businesses filter allows you to see these mentions.

We plan on adding additional themes and would love your feedback. If you have an idea for a new theme, please email us at trumptracker@sentieo.com.

Banner image of Trump (at top) from AP Images. 

Consumer-grade apps don’t work for equity analysts

Our CEO, Alap Shah, wrote a guest article that appeared in HedgeWeek this morning on the topic of consumer-grade note-taking apps, and why they don’t work for equity analysts*.

Investment analysts, by and large, are a pretty smart group. If they can find a better way to do their job, they will. So it’s no surprise that an industry that relies so heavily on information has adopted a number of consumer-grade apps to enhance their workflow. And while better than nothing, this practice can create more problems than it tries to solve.

In the analyst community, note-taking apps such as Evernote and OneNote now often serve as the foundation for the research process, in spite of the fact that neither were designed with analysts in mind. Why are these solutions being adopted? First, they are mostly an improvement over the ubiquitous network and folder structure. Second, they are fairly cheap and easy to use. But perhaps most importantly, they bypass internal IT operations that would otherwise express security concerns with such apps. While these solutions do offer an improvement over a network and folder topography, many times they are more like putting square pegs in to a round hole – they might fit, but you’re going to have to smash them in there pretty hard.

On the surface, consumer note-taking applications appear to be a good fit to manage the enormous amount of information—broker research, news, internal notes, SEC filings, call transcripts, etc.—that forms the basis of the fundamental research process. However, there are a number of instances where these generic apps fall short, and, ultimately, inject more problems into the research process than they solve.

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Auto Insurance Voices Caution As Self-Driving Cars Near

We analyzed over 9 million financial documents, covering more than 10,000 companies across the globe, for mentions of the self-driving car theme. We found that interest in self-driving cars has grown 8.5x in the past two years, but suspect that there is much more interest to come. Predictably, car and technology vendors were earliest in bracing for the technology’s impact, but the insurance industry is now beginning to take the threat seriously.

tesla self driving

Self-driving cars are approaching quickly. Google unveiled its self-driving project just four years ago, while Tesla shipped the first car with its famous auto-pilot feature just one year ago. Though impressive progress has been made, much more is needed before self-driving cars reach scale. In the meantime, there have been setbacks. Last May, the first person was killed in a car operating on auto-pilot, while Uber ended its San Francisco self-driving project after a week amid permit conflicts with the DMV, along with several sightings of its cars running red lights. (The project continues in Arizona.) Despite the inevitable bumps along the way, self-driving cars—also known as “autonomous vehicles”—will almost certainly become a reality within the next two decades, and their impact will be felt massively across the transportation and logistics industries, among others. (more…)

Guest Post: 5 Oil Patch Themes You Should Be Following In 2017

Guest Post courtesy of happy Sentieo client and energy expert Philip Dunham .

2016 was a volatile year for oil and gas. WTI traded to lows in the mid $20s, then rebounded to finish the year around $54. The road to recovery for the energy industry in 2017 can be characterized as cautiously optimistic as WTI prices have stabilized over the past couple of weeks and energy companies have started to slowly hire and ramp activity.

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There were a number of themes that emerged as the year progressed including:

  • Rebounding rig counts and the return of service cost inflation
  • The Dallas Fed and Permian-focused E&Ps expressing concerns over rich Permian Basin acreage valuations
  • Another year of low oil prices and OPEC production cuts
  • The RINsanity of ethanol blending and a possible border adjustment tax
  • Natural gas coming out from the shadow of oil with demand catching up to supply

We will review the themes of 2016 and those themes going forward into 2017. (more…)

Wall Street Consensus Trades Fell Apart in 2016: 16.2% Underperformance

Following Consensus Trades worked in 2013 and 2014, and started to lose some money in 2015. After running the numbers, we were shocked to see this developing consensus underperformance trend accelerate by 1270bps for 2016.

We analyzed Thomson Reuters’ I/B/E/S dataset and looked at instances where analysts were unanimously bullish or bearish on a stock.  It turns out that analysts recommendations correlated strongly with share price performance.  However, there was one tiny caveat: the buys dramatically underperformed the sells in 2016.  The unanimous buys were up 4.5% while the unanimous sells were up 20.7% so a market neutral consensus portfolio lost ~16.2% last year.  It turns out that 2016 was a year where betting against the analyst herd paid off!

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The chart above shows the distribution in share price performance between both cohorts. (The bullish group had outliers up +1618% and +1189% that are not shown.) While the winners in both groups performed roughly the same, the losers in the bullish group fell more than the bearish group.

One major factor behind the underperformance was the bullishness surrounding small-cap development-stage pharma stocks.  For healthcare stocks (which were mostly small-cap pharma names in our cohorts), the number of consensus buys outnumbered the sells by a factor of 13.7X versus a baseline rate of 2.24X.

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Why $SNAP Will Be The Most Unprofitable Social Media IPO Ever

Note: The S-1 dropped on Feb 2nd revealing that Snap made $400m in 2016 but spent $900m, which means we severely underestimate the degree of losses at Snap. Chief among the negative surprises was the negative gross margin indicating the very costly hosting needs of Snapchat’s services. Follow our live annotations for more.


 

Snapchat lost $130m in 2014. Despite getting serious about monetization and growing revenues 11,000%, we estimate operating losses have grown significantly, making $SNAP the most unprofitable social media IPO in history.

Allegations of misrepresented growth numbers are flying today after a heavily redacted copy of a lawsuit from Snap’s former head of Growth was leaked to local media. Although the company is no stranger to high profile lawsuits, sentiment on the famously reclusive company will focus on the few datapoints that the market has. We aim to help clarify the discussion by compiling the public consensus and filling in the blanks for the unknowns so far, from Fidelity’s consecutive writedowns to a rash of extremely expensive acquisitions. We provide a full working model for Snap’s revenues and costs and demonstrate why Snap needs to represent high octane growth for its upcoming IPO (hint: show me the money!)

The potential reallocation dollar shift. Source: hootsuite

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Mosaic Quick Take: $FIT needs a new New Year’s Resolution (and guide)

Fitbit (FIT) surged over +7% earlier this week after the Fitbit app jumped to the #2 spot on iTunes on Christmas Day. Although short interest was 30% of float, there was a desire in the market not to be offside if the company’s wearable bands were once again a popular gift for the holiday season. 

It was not long before some analysts and news outlets pointed out that Fitbit was not highlighted as a top overall best seller by amazon.com this year (Link: http://blogs.barrons.com/techtraderdaily/2016/12/27/fitbit-wasnt-a-winner-in-amazons-holiday-press-release-notes-cfra/). Momentum reversed and the stock fell back to previous levels in a few days.

In this post we show how subscribers used Mosaic to track Fitbit in realtime.


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Using Google Chrome: some tips and tricks for equity analysts

Google’s web browser can save you time by loading web pages faster (sometimes 10X faster) than other browsers.  Here are some ways in which Chrome can save you even more time:

  • Add bookmarks to the Bookmarks bar that appears when you open a new tab.
  • Add shortcuts to Chrome’s address bar, letting you access websites with fewer keystrokes.
  • Re-open closed tabs with Crtl + Shift + T.

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