jbb

For true long-term corporate performance, I would want to look beyond just the 6 and 12-month share performance relative to competitors, but rather over a multi-year time horizon. Which companies are able to consistently and sustainably return value to shareholders over many years is what matters to me. Anything can happen within a 52-week period.

Also, in addition to just stock performance, I would want to see valuation multiples to see which company's the market has greater faith in to provide long-term returns. As others have mentioned, it would have been much easier to beat its competitors over the past 12 months if it's P/E multiple was coming in at a very low base and the multiple expansion has just been bringing AC back in line with the industry average.

IN short, there are many, many things which can move an equity price in the short term. Show me 5-year, or preferably 10-year data please!

Generally, rapid growth companies do not pay dividends as they prefer to reinvest their capital to drive headline growth. That said, on the other end, well-established (ie. utility-like) businesses will tend to pay the highest dividends as they are in the best position to repay shareholders. Not sure where AC and Westjet stand in terms of growth vs. paying out shareholders, but it's always a balance large firms are trying to deal with.

Gogie

There's more than one way to give cash back to shareholders. AC has implemented share buyback plans in the past (2011 - http://business.financialpost.com/20...yback-program/) and is expected to do so again in the future - http://o.canada.com/business/air-canada-cost-cutting.

CloudsBelow

Oh, hey, look Ken's back. Wanting an update on the stock prices.

... Anyways, to the real-world results

Trailing 6 months :
AC : + 37%
WS : + 18%

Trailing 52 weeks :
AC : +345% (not too shabby, eh?)
WS : + 41%

So, What's your point exactly?

Ohh, and I promies you, I will update the numbers late next week to see where we're at.

CloudsBelow

We’re a week out from AC’s Q2 results call.

Anyone think 2014Q2 EBITDAR will break the record set in Q22013? Could it reach $500m?

I jumped in for more today @ $9.79 ..... Expecting (hoping for) impressive results. Don't think it's fully priced in yet and feel a surge through $11/share is possible after the release next Thursday.

Anyone else trying to time the market for the results release? Anyone on the other side?

tyberius

Share buyback plans do not give cash back to the investors.

It does three things.

1. Creates a temporary imbalance in buy/sell activity which can contribute momentum. This is useful for people who are trading the stock (i.e. sucking blood out of the market and providing no benefit to anyone except themselves). This does not help owners of the stock in any way except for the happy moment they get to count their artificial paper profits.

2. The assets of the company are split among fewer owners since there is less stock. So is the debt. Most companies do not trade strictly on the value of their assets though but on future predicted performance of the business. If the company has positive and growing assets though, owning a greater percentage is beneficial. However, the company used your cash that you own as a partial owner of the company to buy back stock from the market. So though you own a greater percentage of the company now, you just threw away your own cash buying it. It is no different from them giving a dividend to you which you use to buy more stock of the company, except it is more tax efficient. Nets out kind of neutrally.

3. If the company is paying a dividend, your dividend just went up. So buybacks are pretty nice when you own shares in a company paying a dividend.

With no dividend, stock buybacks are pretty moot because the stock is going to fluctuate down the road anyway and so unless you're trying to time a sale and get out, really has no substantial benefit to you as a buy-and-hold owner.

It is great for everyone making fees, or for executives who are getting paid with stock options though as the company issues them new shares increasing the float, then the company buys back the shares in the market at a temporarily inflated value due to their own buying activity and the executives make out like bandits.

Otherwise, the way to reward owners of the company is by paying and increasing a dividend first. Secondly, after establishing a dividend, you can play with stock buybacks.

Lastly, the *only* reason to own a stock is the dividend or the potential of future dividends. The *wrong* reason to own a stock is "because it is going up", which is the greater fool theory. You buy it because it is going up which means that you can sell it to someone else down the road for more than what you paid.

If that is the only reason, then it is no different from a tulip bulb or a bottle cap. If the stock will never pay you, you are waiting for the greater fool to come along and buy it from you for more. In practice, there are a lot of greater fools, but it makes for high risk to depend on this route. The general idea remains that fast growing unprofitable companies with great products will eventually become slow growing stable businesses with steady profits. Buying it now while it is cheap and growing will look really great in 15 years when it is paying out a dividend.

This is kind of boring though. People instead buy into the myth of the forever spiraling up stock, where everyone has paper profits, never sells, and there is always a greater fool waiting to buy their worthless chunk of nothing for much more than they paid and this cycle can somehow never fail.

tyberius

Gut feelings and attempts at market timing.

The sure fire signs of a well thought out investment strategy.

CloudsBelow

So, you feel my speculation position @ 9.79 is a bad one?
Or, is this just another non-committal, Monday-morning QB post from you?

I will leave the investment strategies to you while I ride my gut feelings ...

tyberius

I guess you fail on basic reading comprehension.

I will rephrase for you, maybe it will help you understand the second time around.

Gut feelings are for gamblers. Losing gamblers.

Market timing is not an investment strategy. It is for fools. Fools that may wave pom poms and ask, hey, who's in it with me?

If I flip a coin and it comes up heads as you shout heads, you can go home all you want and congratulate yourself on your foresight. If you want to build an investment strategy around your gut feelings and market timing on whether or not a coin is going to come up heads or tails, you are welcome to. Over the long haul you will hand your money over to the people who are smart.

By all means, do what you feel like doing, even if it is stupid.

Do you think Air Canada will forever be above nine dollars and seventy nine cents? If you sell for a profit, congratulations. Does that make you stupid though if it goes higher and you left all that money on the table? If you hold forever and it falls below 9.79 are you now stupid? Are you going to post here every day and scream at your enemies how much paper profit you're making when it goes up? Are you going to time the market on your exit? If you sell does it mean that you no longer think Rouge is a good strategy?

Do you even know, in the slightest, what you're doing? Lol. I think that amount is clear. "My speculation". You said it all right there. Nobody will stop you from gambling. Maybe you win, maybe you lose, but gamblers have no clue what they're doing. It's speculating. You're one of them by your own admission.

CloudsBelow

Yeah, you (or someone like you) were eager to point that out to me last year when I posted AC.B @ $2 seemed to be excellent value for short/medium term and I was jumping in

I'm in the game to make money. IMO, this isn't a coin flip. I feel there are lots of strong indicators AC is going to come in with results that will lift the stock above current levels. Simple as that. I will let you and yours go on about strategies ... Sure I can find the strategy books right beside the "Brand is King" books at the libraries where older people go to read

Ummm, what's this "after the coin lands" nonsense?? I've told you I'm in now @ 9.79 and don't think the market has priced in results that will be released next week. Might be right, might be wrong. It's house money anyways thanks to AC.B speculation for a year now.
I'm in the game ... you stick to yelling from the stands about how things were when you were young

Shareholder

Even with expected results next week, I don't think there's much more upside to AC at the moment. The market may respond temporarily but not for the same sustained length of time it has. Going from under $2 to around the $9-$10 range has been a pretty good marketing job on the part of AC execs, and good fortunes in the NAmerican industry overall, has meant AC shares have reached a reasonable level. (Of course, reasonable levels don't mean much in the hyped up stock market if a group of investors gets hot about a stock...) Remember, AC had a dip in recent months and only just recovered to this level from the $7 range where it's been most of the spring.

I've got AC and AA shares (which have gone from just under U$20 to the mid-U$30s) plus AE/Aimia and Chorus (spun off from ACE so in the long term with other spin offs cost me little) but am not planning to increase either. I believe AA announced it will start paying dividends but i don't anticipate AC to be doing so since it's run-up has been huge enough to permit some profit-taking. It would be more beneficial to pay down debt and/or refinance the balance sheet in this capital intensive industry.

CloudsBelow

All good points.
I was out of the sector (AC and BBD) but jumped back in w/ AC for the action I guess.
I think Q2 might have been a sweet spot for them - kind of a honeymoon phase - and hope the results will beat street expectations and push it through $10.50 (rationally or irrationally). I'm in this very short term
A rising tide floats all boats but market hype can be just as powerful. CAD softness YoY is a concern and will drag - I know AC USD hedge will mitigate some impact.
Action is fun ... Looking forward to the call next week.

drvannostren

Ugh, I dunno man. I'm expecting a really good quarter report from AC but it doesn't seem to matter what's happened lately everyone is getting slammed. Twitter has been one of the few stocks I follow that jumped up after a good quarter. I've got AA and after a good quarter it's now down more than $5 from where it was BEFORE it reported.

I bought AC at $7.95 with one of my first ever trades, got more when it dipped from there into I think the high 6s if memory serves. Hit $10.50 maybe 3 weeks ago after a run and I thought it'd hit 11 (I think the high might've been 10.80). Never did, now it's back in the singles and I dumped half when it shot to $10 briefly a few days ago. I've got my sell order set for 10.50 for the rest but I'm not sure man. I feel like even a good quarter and it'll slide back to low 9s high 8s.

Long term I think we're in good shape (12-18 months) but in the short this past week's sell off hasn't been good and if it continues into next week it could be a bit ugly...which does create buying opportunities. I wouldn't buy this high if I were you trying to time it.

Sure you might miss out if it does spike upward, but you could also be kicking yourself if it slides again to a point where buying really makes sense.

Stranger

What drives the AC stock price?

As Greenspan (best known for the subprime disaster) would have it, irrational exuberance, I suppose?

HerpaYvr

I was trying to come up with a funny and creative response, but you win with that one ^


I do check the insider's report (VERY BUSY) so when I see some dump (perhaps too strong of a word) or sell off the stock?????

yyznomad

Who actually owns AC stock... and why?