Income Trust Talk

Acquisition deals involving income trusts have surged 94% in the second quarter vs. the first. In fact, that meant 62 of them in total during Q2, according to an analyst’s report covered by the National Post recently. If you look at the dollar values involved, that represented a 300%+ increase Q-over-Q to $12.2B.

Should that matter to us? Absolutely! Our focus is on capital gains and any company that is acquired is typically done so at a significant premium… often 10-30% or more over the price prior to the announcement. So hang on to the next likely targets and you should do well.

And, amazingly enough, as today’s trusts get acquired, new ones are still coming onboard. That means that these companies see value with the trust structure even though the taxation changes announced by Jim “Flim Flam” Flaherty affect new trusts immediately.

I keep hoping that some investigative business journalists will dig into this, but I may have to do it myself.

At a macro level, we can only speculate that the Conservatives are doomed in the next election and that the Liberals will at least partially reverse the Conservatives’ broken election promise.

The other positive note is that Flaherty is already having some of his responsibilities taken away by his superiors. This could be the beginning of the end, if the powers that be decide to take a pre-emptive strike and replace our finance minister. That would definitely be a plus for Conservative chances in the next election… as long as they don’t replace him with a clone. I can’t think of anything positive that Flaherty has contributed to this country during his tenure. Can you?

—————————–

Meanwhile, don’t forget that we’re still updating our Top 30 PTR every week. We, no doubt, need to upgrade our documentation on the approach taken here, but our chart highlights the Top 30 from our best estimates of Projected 52 Week Total Return. We use our relative trend analysis™ (RTA) to estimate the capital gains portion, then add on the potential gains from income (always tiny by comparison). No guarantees of course. Both trends and distributions are subject to change at a moments notice.

As with all our web investment sites, we encourage due diligence. We want you to use our data and opinions as just another tool in your investment strategy.

And, most importantly, we do not recommend that investors use income trusts primarily as a source of income. We know that runs contrary to popular opinion, but even without the Flaherty Curse, there are far too many factors that could result in cuts in distributions, which in turn result in major drops in trust share prices. This is not a low risk investment category, but we believe that it will continue to be a profitable one for those who do their homework.