Opinions
Colin Stewart
Russel Metals
RUS-T
BUY ON WEAKNESS
Jun 08, 2016
Stock price when the opinion was issued
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(A Top Pick Aug 28/20, Up 94%) The stock market is discounting a lot of the recover happening. Has moved to CCL Industries now. It starts to get harder to hold in a cyclical business when it's runup this much.
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. It is very cheap. The balance sheet has improved and the company is in the value stock segment. The company is in a cyclical industry. It is at 4.8x earnings, which is quite good value. Unlock Premium - Try 5i Free
It is in the metal fabrication business. They just raised their dividend this year and have dramatically changed their balance sheet for the better, so it is in much better shape than in past cycles. They also have a U.S. operation and have done a great job managing their working capital. Tariffs could hurt them a bit.
His fundamental analyst on this name rates it "outperform" and doesn't see 50% tariff ramifications as huge. Higher highs, higher lows. Since tariff tantrum, has really started to pick up and try to push higher. Likes the setup. If he's right about the rally into August, should retest recent highs around $46. So another potential 10% upside.
Canada's showing leadership, commodities moving higher, big infrastructure push. This name should participate in the broad expansion we're seeing in Canada. Yield is 4.05%.
Massively expanded footprint in US, so tariffs don't affect them as much. Benefits from infrastructure builds, both in Canada and US. Need material inputs to build all these data centres, energy infrastructure, and so on. Fantastic management. Amazing capital allocation. Very solid balance sheet, buying back stock. Margins went up last quarter, so he hopes they can sustain (or even improve) those. Yield is 4.18%.
(Analysts’ price target is $50.20)
A very well-run company. Operates in a volatile business of steel distribution, but has a very attractive free cash flow generation. It tends to be a bit countercyclical, in that when things get tougher they work their inventory levels down, and the free cash flow actually goes up more. Pays a very healthy dividend which he feels is sustainable. A good, long term company to be in. Wait for a pullback to put new money in.