Aecon Group Inc (ARE.TO)

One of the largest Canadian construction companies. Has been hit as a large proportion of their earnings come from energy related areas. However, they are also very big in infrastructure. Trading close to BV. Management over the last couple of years has achieved a significant turnaround in the operating efficiency of the company. A sale of their exposure to the Quito Peru airport, is also a positive to their balance sheet. Yield of 3.05%.

Got hit badly on account of its whole Western Canada theme where everything was thrown into the dustbin that had the name energy written on it. This is one of the babies that fell into the bath water. A lot of analysts have been revising their target downwards, but there are a bunch of catalysts in this company. One is a 45% ownership of an airport concession as well as its construction business and its backlog. Yield of 3.14%.

This is his derivative play on the energy sector. It has an energy exposure and has fallen over the past few months because of that. Energy exposure is about 45% as of their last report, but the stock has fallen 50% from its highs. In Canada there are 2 seasons, winter and construction. Construction companies such as this tend to do well all the way through to the spring and even into the end of summer. The average gain between now and about April is about 9%.

Originally bought this at around $13, but as it began to drop he started to buy aggressively. Historically when it is trading at or below BV, it is a good time to buy. Primarily an engineering and construction firm. Oil and oil sands exposure is only 25%, of which 60% is related to maintenance work. Very cheap. A catalyst is the sale of their Quito Ecuador airport concession. Yield of 3.28%.

The problem is that the acquisition of 2 or 3 years ago added dramatically to the energy exposure. If you start to get any contract cancellations this will hurt them. This fear is pushing the stock down.

Typically does the best in the spring. The trend is down. It is close to the 20 day moving average. You want more technical evidence that is outperforming. You might want to get in in the next 2 to 3 weeks, but you want more evidence.

This and Stuart Olson (SOX-T) have a lot of exposure to Western Canada and oil sands. In this environment he feels there are going to be more cutbacks in CapX in 2015, so you have to be very leery about these names. Feels they are candidates to be shorted.

Convertible debentures from Aecon. He is looking for a more conservative way to play an equity. 5.6% yield. You get back 100% in three years. Not a lot of downside. It has been hurt along with the oil situation.

There has been a selloff in this group, and some of it has been related to other things that are going on in the big picture in engineering companies. (See Top Picks.)

Has fallen back into a range which can be normal, before it goes back out. A lot of indicators are really oversold. On a long-term basis he thinks this is still in the right space and is building a bit of a base here.

Reported this morning and results were disappointing. Their end markets are weakening. Her preference for the engineering/construction space is to be more global, such is Fluor Corp (FLR-N).

They are in three different areas. Trading a lot less than peers. He likes the sector.

They take on the contracts, often fixed priced, and then they can get into overruns which crimps the margins totally. Trying to get their costs under control, and just have not been able to do it in a time when the industry is booming.

(Market Call Minute.) He is looking at a sister company, WSP Global (WSP-T). Likes the sector.

Likes this. Sold it and moved to SNC Lavalin (SNC-T) where he sees 10%-15% upside. He still holds this company’s convertible debentures. A good company, but it just got a little ahead of itself for him.