Monday, February 14, 2011

MI Developments 2

I had read some favorable reports on this stock (TSX-MIM.A, NYSE-MIM)) in 2003 by TD Newcrest and so, I bought some stock. It was probably a flavor of the month type stock. It seemed to have good coverage and I have always like Frank Stronach. However, it was not a good investment. It is good that I generally try out stocks with some small purchases and seeing how things go before making a stock a core of my portfolio.

The first thing I looked at was Insider Trading. There has been no insider buying or insider selling over the past year. A positive thing is that lately, options issued have been kept. However, the CEO and CFO both only have options and no stock whatsoever.

It is also interesting that Greenlight, a NY Hedge fund is not on board with paying Frank Stronach to leave. They have been trying for years to get rid of the special voting he has. I also think that the recent decrease in dividends is not good. I think that it shows that this company cannot afford to pay the dividends and there is no indication I can see that this company will solve their problems anytime soon.

I think if you hold a company that decreases their dividends, you have to take a very close look at it. It may be time to sell, buy more or just hold on. My decision, even before they cut their dividend, was I did not think this was a company I wanted to hold.

The first thing to look at is Price/Earning Ratios. For this stock, this is impossible to get a fix as it has so many years of not making any earnings. I also can not get one for now, as there were no earnings last year or over the last 12 months. I can find nowhere on the internet that anyone is taking a guess at the earnings for this company for last year, this year or the next one. I also cannot get a current Graham price for this stock because of lack of earnings.

The current dividend yield of 1.4% is lower than the 5 year average of 3%. However, this is to be expected since they just lowered the dividend. The only real fix I can get on this stock is the Price/Book Value Ratio. Currently, this ratio is at 0.79. If the ratio is below1.00, it means the stock is trading below its book value. Usually this is a very good sign that a stock is underpriced. However, this stock has always traded below the book value. The 8 year average is 0.59. The current P/B Ratio is therefore some 35% above the average. This shows that the stock price, on a relative basis, is high.

When I bought this stock there were a number of analysts following. However, I cannot find any following this stock at the moment. The one thing that stands out is that there has been a lot of trading on this stock and the price has zoomed up. It is hard to know whether this is solid support for this company or just speculation. Currently, I have no interest in this stock, but it is interesting to see what happens to it over the next while.

There are always going to be stock purchases that turn out to be mistakes. It happens. In retrospect, I think that buying this stock was a mistake for me. I had done some diversification into real estate for my portfolio. This had looked like an interesting stock. I also think that it is important to talk about stocks that were not good purchases for me as to talk about ones that were.

This is a real estate company that currently owns, leases, manages and develops a predominantly industrial rental portfolio. Almost all of their income producing properties is leased to Magna and its subsidiaries. It also holds a 53% equity and 95% voting interest in Magna Entertainment Corp (MEC.A). Its web site is here MI Developments. See my spreadsheet at mim.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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