Caution is Warranted

Following are companies that I would stay away from. They may present an opportunity for a thrill-seeking speculator, but serious money can probably find more promising alternatives.

Medical Facilities Corporation

They run three private hospitals and surgeries in the United States, especially Oklahoma. They have negative earnings in two of the last three years and their debt to equity ratio is off the charts. The CAD/USD exchange rate isn’t helping. And big changes could be in store for health care in the United States.

Chartwell Seniors Housing Trust

They own seniors housing in independent living, assisted living and long-term care. They have had lots of turnover with asset sales, replaced management, restructuring and two distribution cuts. The regulations in the industry can change quickly and it’s difficult to be profitable. The earnings in the last three years have been negative. Debt is very high.

Boralex Power Income Fund

They own 10 power generating stations: eight in Quebec and two in New York. They use hydro and wood chips for electric generation. They have negative earnings in each of the last three years and recently (Jan 2010) cut their distribution in half. They may never recover their former value.


They manufacture and sell of a range of stock and custom envelopes and related products. Supremex has 10 manufacturing facilities across seven provinces. Negative earnings in the last two years. Companies are trying to use less paper and fewer mailings, meaning less need for envelopes. They were over-distributing, which calls into question management’s judgement. They cut distributions from $0.10 to $0.05 to $0.01. It seems highly unlikely that these units will ever recover.

TerraVest Income Fund

This is  a holding company that owns five unrelated businesses in oil & gas, housing and manufacturing. That’s always a difficult proposition. They are profitable again, after two years of negative earnings. The distribution seems very inconsistent, although that means they probably don’t distribute more cash than they generate. It’s not clear that this would make a poor investment, but it seems more speculative than I would want.