Badger Infrastructure (BDGI.TO)

(A Past Top Pick Dec 2/16, Down 11%) There had been a bearish article on them. He thought the hedge fund did not have a good case on them. He should have bought it when it fell because a lot of insiders bought then. He thinks it will be okay.

Recently came under selling pressure after its 1^st quarter earnings were announced, because of a bad month of January. Their operations have been doing well since then. A Short Seller jumped all over it, saying bad things, which scared people away, creating a buying opportunity. They are in earthmoving using high-pressure water, and are the biggest in North America. They are now bigger in the US and non-energy than they had been before. Dividend yield of 1.8%. (Analysts’ price target is $36.)

Management is very conservative in what they do. It has an ROE of 15%, good free cash flow, and asset turnover is extremely efficient. The earnings are expected to be up 11% in November. They want to double their business in the US over the next 3-5 years. The dividend was increased. (Analysts’ target: $36.00).

(Top Pick Sept. 9/16, Up 0.65%) He bought it when it was about $5 as an income stock. They’re not as big in oil now, but in municipalities. This year it had a slow January. The next two months were so good that they started to build more trucks. Last week it reported excellent results. But a short seller went very vocal. He feels this is a great long term hold.

He is short this. They are in a particularly tough spot at the moment in that they operate in what he believes is a commoditized business, mobile hydro-vac vehicles. With almost 70% of the business being in the US, this is one of the companies that would be harmed by a stronger Cdn$. However, it really comes down to an overcapacity issue. There are more trucks than are required. Two of their competition are in the process of merging.

(Top Pick Jun 29/16, Up 14.70%) He thinks manipulation is going on. You should load up the truck on it. This is a great business. They are growing profitably in the US.

He doesn’t like the huge amount of management turn over. There are some questions around accounting and some of their franchisees. Has a very tiny Short position on this. There is more downside than upside on this.

This is in the business of building trucks that contractors use, both in energy and utility areas, for moving earth with high-pressure water. It is now more in the US than in Canada, and much more in utilities rather than energy. They’ve done all the right things, and are the biggest in the industry in North America. Their most recent quarter had a soft period in January, and a Short seller got a hold of this and publicized it, which knocked the stock down. This will be a “show me” stock until they report their next quarter in August. This is an opportunity.

This is the latest Canadian company that is the subject of a Short selling campaign, originating in California. He could never understand how they could build a competitive company in this kind of business.

Felt valuation was pretty high for a low-tech business. At the current price, in the mid-$20, if there is nothing wrong and if their earnings follow-through, then the stock has potential. However, the elevated risks would still bother him. We’ll find out more in the next few weeks, and if you are comfortable, the entry point might be decent.

The issue is that in 2014 the stock got all the way up to about 16 times book value. Then it fell from grace. Going forward people think it will only go back to there. Earnings didn’t support it back then and still don’t. There is not much momentum in earnings, so they are overvalued. He has no interest in it.

He is short this. They build and operate mobile hydro-vac trucks or excavations. They always had a competitive advantage in that they basically invented the hydro-vac truck space. Now though, anyone who can get financing, can effectively have one of these. They have had a very large number of executives leave over the last couple of years. He also feels they have the potential to be harmed by a border adjustment tax, as they manufacture in Alberta and ship into the US.

They continue to move more and more of their business down into the US, and the stock has done really well. They are starting to see a pickup in the number of trucks they are building. If we see a ramp up in the infrastructure in the US, that would probably really help this company.

It is not an everyday stock. They use high pressure water to move earth. They used to be mostly in the energy area and then moved into the utility area. Recently they moved into the US. People still treat them as a Canadian energy company, but 2/3rds of their business is from the US and 3/4ths comes from non-energy. Earnings continue to grow and they raised the divided recently. (Analysts’ target: $35.00)

This is not a bad business, and if you believe in a large fiscal stimulus structure spend in North America, this company would stand to benefit. He would rather own something in the engineering space.