Archive for July, 2005

Tim Horton’s IPO

July 31, 2005


Obvious prospects for physical growth in a business do not translate into obvious profits for investors. — Benjamin Graham, The Intelligent Investor

Ending months of speculation, Wendy’s (NYSE: WEN) announced its plans to offer part of its Tim Horton’s in an IPO. Tim Horton’s is enormously profitable, earning $247 million (US) on revenue of about $1 billion. The chain has grown revenue by an average of 14% and profits by 21% annually over the past five years. Same store sales rose by an average of 7% over the same time period. The company also has significant growth opportunities in Western Canada and Quebec and is just starting to expand into the United States.

While Tim Horton’s is a great franchise, I am not sure it will be a good investment at any price. The iconic status of the doughnut shop in Canada and its strong profitability are likely to generate strong interest from investors. The size of the offering is also small compared to the potential demand, all of which add up to the shares likely being fully valued. In a few year’s time, when the honeymoon is over and Tim Horton’s makes a misstep or two (say in trying to expand too fast in the US), a nice opportunity to buy some shares will present itself. Till then, I will just be waiting patiently, enjoying my honey crullers with double-double coffees.

Surviving a Layoff

July 31, 2005

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For technology workers like me, layoffs are almost a way-of-life. I’ve been laid off from my job once and I know plenty of friends who went through many layoffs in succession. That is why, I read the column, 14 tips for living through a layoff, with great interest.

I agree with all the tips, but I think the last tip, “Don’t worry, be happy”, is the most important. While layoffs are very stressful, a job search in a down market is downright depressing. Some days, you wonder if you are ever going to work again. It is very important to be hopeful (maybe not happy) at such dark times.

This and That

July 28, 2005

  1. A TD Bank report finds that except for Vancouver and Victoria, there is very little evidence of a housing bubble in Canada.
  2. There is another glowing mention of Pat McKeough’s Successful Investing newsletter in a article. Mr. McKeough was a previous editor of The Investment Reporter, ranked one of the top newsletters, according to the Hulbert Financial Digest. Both newsletters are subscribed by most public libraries and are worth checking out.
  3. The Financial Post compared the yields in the Canadian energy sector with its global peers and found the Canadian yields stingy. However, note that the most efficient use of capital is reinvesting profits in the business (Dividends and buy-backs come second and M&A a distant third). Canadian energy companies have plenty of opportunities, especially in oil sands.
  4. Most of the furniture in our home is from Ikea. We should have waited a bit before buying because Ikea is cutting prices on more than 500 best-selling items by an average of 17%.