Fellow procrastinators, unite!
Ah, you know what? We can do it tomorrow.
God, even his jokes are lazy.
LISTEN UP, SLACKERS. If you’re going to be making an RRSP contribution you’re going to want to do it today. Or tomorrow, I guess. You’ll have to get that bad boy done before March 1st if you want the contribution to count towards your 2016 taxes. And as we’ve already established, you do. Using your RRSP to minimize your tax liability today is one of the major advantages of contributing.
Remember that you don’t even have to come up with fresh cash to do so, either. You can flip unused cash from a margin account to your RRSP or even make an in-kind contribution, which will move a security from a non-registered account into an RRSP. Note that you’ll have a tax liability if you move over a stock you’ve made money on.
Immediately after typing that sentence I looked and took $5,000 in cash I had in my margin account and used it to make part of this year’s RRSP contribution. It took about five seconds and I saved at least $1,000 in taxes. That’s not quite the best ROI of my life, but it’s close.
Anyhoo, enough bragging. It isn’t just enough to make your RRSP contribution. You gotta invest that ish into something. Too many people put their RRSPs into cash or near-cash alternatives, earning a whole 1.5% a year. Oh my! Somebody get me the fainting couch!
Don’t do that. Follow the Financial Uproar RRSP guide instead. I’ll tell you kids exactly where I’ve been putting my money lately. If we go down, we’ll go down together. Misery loves company.
High Liner Foods
High Liner Foods (TSX:HLF) released earnings last week that, in a word, sucked.
The issue was mostly with the top line. Revenue in 2015 was US$1 billion. It was US$956 million in 2016. Management also said they expected the decline to continue in 2017 as more people move away from battered fish sticks.
But there’s plenty still going right at ol’ Captain High Liner. The revenue decrease was made worse by declines in the Canadian Dollar. Volumes were only down about 2.5%. And most importantly, it’s still a very profitable company. Earnings for 2016 were US$1.31 per share after accounting for a one-time charge. That translates into $1.73 Canadian, which puts High Liner shares at less than 10 times trailing earnings.
It’s even more profitable on a free cash flow basis, thanks to amortizing intangible assets. Free cash flow was US$63.3 million for the year. Convert that back to canuck bucks and we get $2.68 per share on a fully-diluted basis. That puts High Liner shares at just 6.5 times free cash flow. Excellent.
High Liner has plans to make more acquisitions in the U.S., which has a fairly fragmented seafood market. They’ve paid down a lot of debt in the last couple of years, which should give them enough balance sheet flexibility to make a deal or two.
Oh, and shares pay a 3.2% dividend with the payout nearly tripling (from $0.05 to $0.14 each share quarterly) since 2012. That last part was for you dividend growth investors. I’m looking out for y’all.
Hammond Manufacturing (TSX:HMM.A) is a crummy business trading at a great price. It’s a classic cigar butt stock.
It makes electrical components, including things like enclosures, racks, cases, outlet strips, surge suppressors, and electronic transformers. It is every bit as boring as it sounds.
It’s also kind of a bad business. In 2015 (2016’s full-year numbers aren’t out yet) the company did $117.2 million in revenue. It posted profits of just $3.55 million after tax. That was still good enough to earn $0.31 per share, a nice result for a company that only trades at $1.95.
2016 has been much worse. The company borrowed heavily to build a new factory, which should help bring costs down. It hasn’t done so thus far, however. Earnings for the first nine months of 2016 were just $0.09 per share. That should improve in the 4th quarter, however. There were some disruptions when things moved over to the new factory.
You guys can probably already guess why I’m even mentioning the stock. It’s ridiculously cheap on every possible metric. It earned $0.31 per share in 2015, putting shares at just 6.3 times those trailing earnings. 2017’s earnings should return to that level. It trades at 50% of book value (the current price is $1.95 and book is $3.80). If you exclude costs for the new factory, it oozes free cash flow. It’s even ridiculously cheap on a price-to-sales basis; it trades at just a 0.2 P/S ratio.
Or pick a cheap index
I’ve harped about a million times how Canadian and U.S. stocks are expensive. I don’t hate the idea of putting money to work in a cheap index somewhere across the sea.
I personally have a decent sized position in a Russia ETF in my TFSA. I’m very happy to hold that position for a few years. You could do a lot worse. I’m also a fan of nations like Colombia or Poland these days. Even Turkey is an interesting wild card.
There’s a new stock I’m looking at but I haven’t had a chance to do a write-up for it yet. It’ll be available on Thursday or Friday for email subscribers only.
Disclosure: Nelson owns High Liner, Hammond, and a Russia ETF (RSX).