Cott: Investor Interest Starting to Return

By Andrew Willis

One of the great recovery stories of recent years continued to play out yesterday, as Cott Beverages (COT) staged its latest successful financing, and made its balance sheet part of its past.

Cott, the non-name pop maker that was on the ropes as recently as last year, sold $215 million (U.S.) of bonds that come due in 2017. The offering carries an 8.375% interest rate, and was upsized from $200 million in the face of strong investor demand. That’s 565 basis points over the comparable U.S. government bond.

Barclays Capital (BCS), Deutsche Bank (DB) and J.P. Morgan (JPM) led this successful outing.

This is the latest sign that the investors have faith in Cott - the company struck a new $250 million credit facility back in March, and sold $50 million of stock in August.

These financings, along with a sharp improvement in results after a painful restructuring, has sent Cott’s share price soaring. The stock is up 579% over the past year.

Stock plays such as Cott illustrate the great challenge facing portfolio managers over the past two years: Many of 2008’s dogs had their day in 2009.

Canadian small cap stocks massively underperformed last year. Shares in companies with a market capitalization of less than $500 million were down by more than 60%, according to Bloomberg, twice the loss experienced by larger cap stocks. So owning small companies doomed a money manager (or any investor) to underperforming.

Owning small cap in 2009 means killer performance. Through the end of October, TSX companies with market capitalizations of less than $500 million were up 76%, versus an 18% gain on the largest domestic companies - those with a market cap of $10 billion or more.

Comments

[John Mylant:]

My hats off to COT an impressive display of management. Well, small cap are always more volital and obviously if they lost more they could gain more. Not to hard to figure out.

John Mylant
mylantsmoneyblog.typep.../

Nov 05 02:42 PM