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Saturday, December 17, 2011

Tim Hortons (THI): a Gordon Pape super stocks. Really?

So far for 2011, Gordon Pape super stocks selection is: Enbridge Inc. (ENB), Canadian National Railway Co (CNR), BCE Inc. (BCE), Toronto-Dominion Bank (TD) and Fortis Inc. (FTS). To this selection, Gordon Pape recently adds Tim Hortons (THI). Why oh why? But hey, Gordon Pape is Gordon Pape. He’s certainly not the Dividend Girl! lol! I appreciate Gordon Pape but sometime, I totally disagree on what he says. However, you cannot have better TFSA advices than those provide by Gordon Pape. He knows it all when it comes to the financial non-sense literature, so got to pay the guy some respect. At least.

Among Gordon Pape super stocks, I hold ENB, CNR and FTS. During the 2011 financial year, I had invested in TD Bank, but I sold the investment at profit after a couple of weeks of holding. I am not a fan of everything related to finance. I only hold a couple of financial stocks: Sprott Inc. (SII), Bank of Nova Scotia (BNS) and Davis + Henderson Corporation (DH). The reason why I don’t like financial stocks is because they are too sensible to the stock market volatility to be massively hold inside a valuable investment portfolio.

And what about BCE Inc. (BCE)? I exposed my view on BCE Inc. (BCE) before. I don’t think BCE is a good stock to invest in for multiple reasons that you can read on here.

Is Tim Hortons (THI) a good investment? I do go to the Tim Hortons once in a while. For Christmas, I bought my father a 50$ Tim Hortons card. I really didn’t know what to offer and a Tim card was perfect because he goes to the Tim Hortons quite often. So when it come to Tim Hortons, I know the place, I know the products.

However, at 49.03$ per stock, I find Tim Hortons (THI) stock price quite expensive for a company only selling coffees, bagels and donuts among other. On top of an expensive stock price, the dividend yield is low. Only 1.387%. Who’s making profit on Tim Hortons (THI) lucrative business? Certainly not the investors – and certainly not the employees either who are, for the vast majority of them, probably receiving a minimum wage salary. The company is not really generous in term of wage and dividend. Those are 2 factors to take into consideration. Here’s something else that will help you understand better my position regarding Tim Hortons (THI).

At 30.27$, my Pembina Pipeline Corporation (PPL) is much lower in term of stock price or value, but pay a lot more in dividend – 5.154%. I began to invest in PPL when stock price was under the 15$. Enormous gain $$$.

We cannot compare Tim Hortons (THI) to Pembina Pipeline Corporation (PPL) in any way, but you can certainly get better for your money than THI. At this point, THI is in among its highest value. I don’t think that Tim Hortons worth 49.03$ per stock. I don’t believe in that over rated stock value.

It could be a good idea to eventually add a few stock of Tim Hortons (THI) in my portfolio to add up to my internal diversification, but at 49.03$ per stock, it’s something that really needs to be think of. I prefer to invest in other companies. Agrium Inc. (AGU) was my latest investment and it was a good one. Now, my only problem being what’s going to be my next investment? That's the eternal question.

Fact is, it has become a real challenge to invest these days. I do my best to add new stuff in every month but it’s really not easy. It’s getting more and more difficult to pick stock. 

More money, more problems.


Anonymous said...

Good explanation on Tim Horton's share price and why not to buy it. It definitely is not a good buy at that share price.

Anonymous said...

So $49 is a bad stock price for Tim Hortons because they sell coffee and donuts and those are cheap items. Very sophisticated analysis.

Sunny said...

At 49$, THI is in its highest value ever. THI won't be able to continue growing and growing forever. 49$ is way too an expensive price for the kind of business Tim Hortons is on. Add a very low dividend to this situation.

Stuff like my latest investment in AGU is much better because AGU highest value was close to 100$ for the past 52 weeks, I bought by stocks at 67.20$. Dividend provided by AGU is low, but AGU is a real blue chips and can only gain in value. I can say easily say this because of the sector AGU is in: potash.

I was just very surprised that Gordon Pape recently name THI as a super stock. Maybe a super stock back in 2008, but not in 2011 at 49$ per stock. It's not a good time to invest in THI. There's many opportunities out there is this low market, investors need to be more selective and add a maximum of high quality blue chips that have real chances to grow in value overtime.

Anonymous said...

Hi Sunny-You also left out of your analysis of Tim Horton's the fact that their product(s) are often low margin. In addition, Tim Horton's have limited ability to pass their raw material costs onto consumers. This makes it very easy for a competitor like McDonalds or Starbucks to compete. In addition, I don't think managements move to move into diversified products much as upscale lattes, and premium coffees will pay off. Sadly, Starbucks and Timothy's already have a good share of that consumer market. There are better places for your $$$. Have you considered adding an international dividend paying stock to your TSFA account like Nestle?


Anonymous said...

I too sorta scratched my head at the Timmies recommendation.
True the company has had a good track record in divi increases. But it is trading at all time highs. Does it deserve its premium valuation? Earnings have slumped in the past & now have recovered. Its very Canadian market oriented still with a small % US exposure. Then there's the shifting product line from coffee & donuts to brekkie sandwiches & lasagna. The big player Mickie D has Timmies market share in its sights: coffee & muffin for 1.39 Then Mickie D also has Second Cup on the radar with McCafe. Reactionary or pre-emptive strike?
What ever happened to Krispy Kreme...a cautionary tale: successive losses, global overexpansion, 2004 stock highs of 50.00 now trading at 6.00 Dump the donut.


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