Tuesday, July 29, 2008

How turning a profit and boosting revenues turns out badly

Rogers came out with its quarterly earnings today.

I have 122.26993 Rogers B shares through the company share acquisition plan.

The "book value" -- which considers the average price paid for the shares -- is $5106.36.

At this moment, the shares are worth $4252.55. A difference of a little more than $850.

See, the shares fell today. Fell about 5%.

According to forbes.com, "Rogers said it earned C$301 million, or 47 Canadian cents per share, in the three months ended June 30. That compares with a loss of C$56 million, or 9 Canadian cents, in the same period a year earlier. Adjusted net income rose to C$364 million, or 57 Canadian cents a share, from C$299 million, or 47 Canadian cents."

Sounds keen, huh? Earnings are way up, net income is up, profit is up. So why the heck would the shares fall like this?

I asked 680News money honey Leah Walker, and she summed it up: the results missed analysts' estimates.

Ah, of course. Forbes explains, "Analysts expected Rogers to earn 51 Canadian cents a share, according to Reuters Estimates. Earnings before one-time items were expected to be 53 Canadian cents a share."

So what do I think? I think all my non-RRSP savings are locked up in this stock! And I think I'll get a helluva bargain next time the ESAP purchase rolls around if the stock is still this low. And I think that when it goes up to about $50/share (it was $51 a year ago), I'm gonna cash a bunch out, take the profit, and diversify a bit.

I'm just not, y'know, smart enough to know how to do that efficiently right now. I know I can transfer some of my shares 'in kind' to the group RRSP program run by Manulife. That'd let me max out my RRSP for this year without actually shelling out cash. I know I can transfer shares to a brokerage account -- dunno if that includes online discount brokers.

I dunno ... any financial wizzes out there with 2 cents' worth of free advice?

7 comments:

  1. I'm so not qualified to provide you with advise regarding your rrsps (which I also have through a group manulife plan). However isn't it kind of good to have shares fall since that provides the opportunity to buy more at a lower investment?? I realize the overall value at this time for you is lower, but on the flip couldn't you buy more stock??

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  2. Oh, absolutely. I'm always hoping the share price is drizzlingly low when it comes time for Manulife to turn the paycheque contributions into shares, so I get more bang for my buck.

    Bear markets are fantastic if you have some cash to throw in. If I buy a $50 stock at $30, and it drops to $20, then I've lost $10 'til it goes back up. If I'd bought at $50, I'd have lost $30.
    Only problem is, it's impossible for someone like me to tell when stuff has hit a bottom.

    Really, if there was something I wanted, and I saw it on sale for 40% off with full expectation that it was going to go back to full price or more ... hell yeah, I'd buy a bunch!

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  3. Yeah yeah, I see my math error, too. 50 minus 30 is not 30.

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  4. *All* your non-RRSP savings are locked up in this stock? What about a liquid emergency fund? House savings?

    I don't have any individual stocks, because I don't have the savvy or the interest to keep on top of it. We have a "wrap fund", although I've never heard anyone else use that term. It's a bunch of mutual funds managed by a somebody or some group, so a whole lot of diversity going on there. But I can see where you are coming from, with your great stock purchase options at work. I wouldn't be investing in MY particular workplace if given the chance, I'll tell you that for sure!

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  5. Well, *all* is a bit misleading.
    Yes, I have some plain cash in the bank.
    And yes, we have some shared savings as cash in the bank.
    So to be accurate, all my non-RRSP investments are in the stock plan. With a 33% match, it's a good deal even if the stock goes down a ways. When the stock goes up, I'd like to skim some of it out and put it into something more diversified.
    I like what I've been reading about ETFs (exchange traded funds), but they only make sense if I'm buying big chunks. With a $20+ brokerage fee for each trade, throwing $100 at it here and there would be pointless.

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  6. I'm just writing a post on not giving out financial advice, so please do your own due diligence...

    Don't worry too much about figuring out why stock prices move up or down. Nobody has a clue either. The market experts still aren't conclusive about what cause the 1987 crash when stocks fell more than 20% in a single day.

    If you transfer stock that is below your purchase price to a RRSP, you won't be allowed to claim a capital loss on your tax return. I'd be careful about that.

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  7. CC: thank you for the tip!

    I was actually thinking it'd be a pretty sweet move to throw a bunch of shares, at their presently lousy value, over to the RRSP so they can grow proportionally more over time.
    But since you pointed out the whole capital gain/loss thing -- something I hadn't even considered -- I did a search, and happened upon an article at your blog that cleared it all up.
    So I guess I'm still at the same spot -- gotta figure out where to go about opening up a brokerage account.

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