Saturday, June 14, 2014

Short Idea - AutoCanada (ACQ)

Summary

  • AutoCanada's market cap has exploded from $350 million to $2 billion in a year and a half.
  • AutoCanada's valuation is 3-4x higher than its US peers on a P/E, P/S, P/B, and P/CF basis.
  • The strong auto sales market over the past 4 years has been a huge tailwind. It will no longer have this tailwind going forward.
  • AutoCanada doesn't have voting control over some of its dealerships.
  • Analysts present the illusion of a huge number of acquisitions targets and unlimited growth in Canada. They truth is it only has 3x upside in Canada.

I don't typically share my stock purchases, but this is a unique situation in that I am shorting a stock and I am seeking to bring about a more rational price in the shortest time frame possible.

The stock is AutoCanada (OTC:AOCIF, TSE: ACQ), listed on the Toronto stock exchange. Simply put, the company owns and operates around 34 car dealerships in Canada. The reasons why I am short the stock are explained in the graph below.



 
To read the rest of this article click on link below:

http://seekingalpha.com/article/2267263-autocanada-an-easy-short


Best Regards,
Kevin Graham

Disclosure:  Short ACQ

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