Clark Inc. is a Canadian holding company that acquires, holds and manages various other companies. Clark focuses on buying energy and real estate endeavors. Mostly, the company manages real estate located in Quebec, Canada. The stock is trading at $9.88 (Canadian) with a market capitalization of $146 million (Canadian)
I am heavily bullish on two industries: Banks and real estate. Clark Inc., out of Canada is a good way to get into the real estate industry without being a real estate tycoon. Their numbers are impressive and they are positioned to have the stock take off. But, if you look first glance you may be sitting uncomfortably. Look deeper.
Here are the assets and liabilities over the psst several years:
2012: $214,309 / $116,967
2013: $283,434 / $57,781
2014: $253,976 / $7,129
2015: $198,240 / $4,003
I will be the first to be quick to point out that assets and liabilities have been declining. The art of wealth management is creating wealth, and more of it. But, how can you increase your wealth if there is a decline in holdings of a holding company. Quality, not quantity. That is the key that Clark Inc. has been implementing over the past several years. The company has been reorganizing to remove projects that were not performing well enough, or were performing poorly. Instead, they focused on the biggest quality projects they could manage with what capital they had. This is crucial to competition with any company. And the results have been strong. Here are total equity and earnings-per-share over the same several years:
2012: $83,225 / $0.10
2013: $144,504 / $3.17
2014: $245,098 / $5.29
2015: $190,801 / -$0.66
Earnings were pushing very high on total equity. But, then the company started its restructure and divesting program. The end result for 2015 was the negative earnings. However, for 2016, the company is sitting on earnings coming in at $1.47 per share. The current stock is priced at $9.88. That puts its earnings-per-share at 6.7-times. This ratio is hard to find in stocks that are providing positive earnings.
But, it is not just the fundamentals of the stock that I enjoy as much as the fundamentals of the sector. Clark deals in real estate. The economy has been turning quickly. The United States’ economy is expanding at a pace that the Federal Reserve has been lifting interest rates. Incomes in the United States are increasing at a pace that is above its lackluster levels of the past several years. That translates directly into more spending my consumers, with a feedback-loop of increased profits for businesses and increased incomes for employees.
But, the really big thing is the money creation that occurred during the Great Recession. Central banks around the world started printing money en masse. This was all in an effort to assist the economy to move forward. We are seeing the positive results of this with the expansion of the economy. But, what we have only just begun to see is the increase in prices because of the large amount of money that has been printed. However, this is just beginning. Even in Europe and Great Britain, where economies still remain in a precarious state, prices are moving above 2%. Eventually, as incomes increase more and more, this will translate into increased demand for assets. And, any company already holding onto assets will be in a position to increase revenue.
The economics of real estate make a lot of sense right now. You would be well positioned to get into stocks now and hold on to these assets as this next wave of bubble begins. Clark is a great investment to do just that.