I’ve been spending quite a bit of time lately at the ol’ grocery store, moving product from one spot to another while some pretty significant renovations are being done. You might think this is terrible busy work but I’m fascinated by it. Unlike other chains, which have identical plans for each section, this company basically says to me “do it however you want. We trust you to make it pretty.” It’s great fun.
And for some reason they continue to tolerate me even though I bring all sorts of baggage. I spent 40 minutes the other day just weeping in the middle of an aisle. Nobody said a word, although that might have been out of embarrassment.
So that’s given me time to do a little more thinking and a little less writing. Here are some of the many thoughts that have been rolling through my head.
Much of the work lately has been in the health and beauty section, which was accompanied by 14,000 terrible jokes about pregnancy kits. “Oh, you touched that? THE BOX SAYS POSITIVE. THAT MEANS YOU’RE PREGNANT.”
“Uh, Nelson? I’m a dude.”
“That’s the only problem you have with that joke? Wow.”
Anyway, next time you’re in the store take a look at the massive selection in the cold/flu and pain relief section. There are dozens of different medicines. There’s cold relief, cold/flu relief, nighttime cold relief, daytime cold relief, cold and sinus relief, and others I’m undoubtedly missing. You can buy the same medicine in regular strength, extra strength, liquid caps, econo pack, and even liquid form for the six of us who’d rather choke down terrible medicine instead of taking a tasteless pill. And if that isn’t enough choice for you each type of medicine comes in about four different brand names (not including the generic brands).
I’m talking about this to the pharmacist and he pointed out something that each brand was essentially just the same pill marketed slightly differently 40 times. The Tylenol pills mostly contain acetaminophen. Advil has ibuprofen inside of its ugly pills. Motrin is the same. My favorite is Anacin, which a) apparently still exists and b) contains caffeine for some reason.
The point is this. Just buy a yourself some Tylenol and call it a day. There’s no reason to fill your medicine cabinet with 40 different kinds of medicine targeting specific symptoms. They all reduce swelling, which is what gives you relief.
Simple is best. It’s a lesson I kinda wished I learned about my finances a dozen years ago, but oh well.
Rental property in Alberta
If you’re looking to buy some cheap rental property with decent cap rates, forget about New Brunswick. Rural Alberta is the ticket these days. I’m going to go ahead and blame Rachel Notley for this, which is pretty popular in my neck of the woods.
There’s a property available locally for $40,000 that rents for $500 a month. That there is already an attractive cap rate, but it gets even better. The seller (who is avoiding using a real estate agent for some reason), has let it known they are willing to listen to even outlandishly low offers. I predict this property will end up selling for under $30,000.
It has a few issues, but nothing unbelievably glaring. It looks better than you’d expect a $30,000 house to look. It’s got a small garage in the back. The location is good. There’s a problem with tree roots getting into the sewer line, which is a pretty easy fix. Eventually that tree would probably have to come down though, which is a $1,500 bill.
Even if I paid the full $30,000, the cap rate is pretty damn succulent. Annual rent would be $6,000. Take off 25% for expenses and I”m left with $4,500 in profit on a $30,000 investment. That’s a 15% return. Put down 25% of the total price ($7,500) and I’m looking at a return on equity of 60%. These numbers are succulent.
If these opportunities exist in my small town, I’m guessing they’re everywhere.
I talked a little about SNC during my last stock watch list post. I figured it traded at a pretty attractive valuation and the Highway 407 value of about $30 a share meant the share price was probably pretty close to a bottom.
And then this recent controversy hit. Nice going, Trudeau.
But something pretty interesting happened, at least the way I see it. Despite the company being right in the middle of the biggest Canadian political scandal of the year, shares are down a mere 9% in the last week. That indicates to me the market a) had the possibility of this priced in and b) doesn’t think it’s going to end up being that big of a deal.
I still stand by my prediction that the company and the federal government sign some sort of settlement agreement, but I’m now skeptical it’ll happen before the fall election. That adds more risk. Would a Conservative government be open to such a deal? We don’t really know.
SNC is a tricky investment for me. I’m not sure it’s the kind of stock I’d like to own forever. The stock does well when the company is free of scandal, which is the perfect time to sell. You then wait for the next shoe to drop and buy shares again. It’s more predictable than my daily weeping in the grocery store.
There’s other stuff to like too, including SNC’s steady (albeit lumpy) growth history, its dividend growth record, and the potential that it sells that Highway 407 stake (although I think that’s pretty unlikely). The stock might end up on my too hard pile.