Market Buzz – Cash Store Delivers in Tepid Broader Week for Global Markets
World markets appeared to have their eyes squarely on the risk aversion trade this past week (particularly on Friday), as the U.S. dollar strengthened and the European debt crisis continued to give reason to pause the rally.
Toronto’s main index fell half a percent on the week, closing at 12,892.71, a decline of 53.10 points. Seven of its ten sub-indexes fell, led by materials and energy.
While it is true that Ireland will receive financial assistance from the EU and IMF, aggressive austerity measures and a downgraded credit rating left the market feeling a bit queasy and looking in the direction of who could be next — naming Portugal then, the more alarming possibility of Spain.
But not all was gloomy this past week. In fact, a long-time favourite from our Canadian Small-Cap Universe (www.keystocks.com) reported record quarterly numbers this past week.
The company, Cash Store Financial (CSF:TSX), operates more than 550 branches across Canada under the banners The Cash Store and Instaloans. The Cash Store and Instaloans act primarily as brokers to facilitate short-term advances and provide other financial services to income-earning consumers who may not be able to obtain them from traditional banks. Cash Store Financial also provides a private-label debit card (the Freedom card) and a prepaid credit card (the Freedom MasterCard) as well as other financial services, including bank accounts.
This past week, the company announced that for the three months ended September 30, 2010, revenues grew 19.7 per cent to $49.8 million from $41.6 million in the same period last year. Net income jumped 37.5 per cent to $7.7 million from $5.6 million in the same period last year. Diluted earnings per share rose 27.3 per cent to $0.42 per share from $0.33 per share in the same period last year.
Same branch revenues for the locations opened since the beginning of the first quarter of fiscal 2010 increased 4.1 per cent to $101,000 from $97,000 for the same quarter last year. Branch count was 544, up 120 net new branches from 424 at June 30, 2009; 19 new branches were added in the quarter.
Looniversity – Four Top Tax Strategies
Protecting your income from the taxman is like protecting your favorite pie from your big brother – you gotta slice it, hide it, and gobble it up before Big Bro gets his hands on it.
To help you keep more of your income pie away from Big Bro Government, here are our top three tax strategies for young Canadians:
Income Splitting – Splitting your taxable income with your spouse or children can shift income from a high tax bracket to a low one. Some of the ways you can do this include spousal RRSPs, living trusts, asset freezing, incorporating, investing through the low earner, and paying deductible expenses through the high earner.
Deferring Income – Not realizing taxable income until you’re in a lower bracket will also reduce your tax. Ways to defer your income include: RRSPs, Registered Pension Plans, certain types of annuities, Life Income Funds (LIFs), Provincial Stock Savings Plans, and Community Small Business Investment Funds.
Incorporating – With ever increasing incentives, starting your own corporation is becoming more and more attractive. We’re not saying everyone should start a corporation, but if your employment situation resembles an independent business, you might consider incorporating. Incorporating saves taxes by lowering your tax rate, increasing your eligible deductions and income splitting.
TFSA – Canadians have a new Tax-Free Savings Account (TFSA) at their disposal. The TFSA is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income. Specifically, Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA. For further details visit: (http://www.tfsa.gc.ca/)
Put it to Us?
Q. I enjoy your weekly column and would like you to provide me with the broad strokes on the strategy of “value investing.”
– P. Ferguson; Calgary, Alberta
A. First off, thanks for your kind words. Value investing is one of the best known stock picking methods. Dating back to the 1930s, finance professors at Columbia University, Benjamin Graham and David Dodd, laid out what many consider to be the framework for value investing. The concept is actually very simple: find companies trading below their inherent worth or “true value.”
The value investor looks for stocks with excellent fundamentals – including strong earnings, dividends, book value, and cash flow – that are selling at a bargain price, given their quality. The value investor seeks companies that seem to be incorrectly valued (undervalued) by the market and therefore have the potential to increase in share price when the market corrects its error in valuation.
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