Stella-Jones Inc. (SJ.TO)

A major utility pole manufacturer. Yes, the recent/current tough winter weather is a factor, but a bigger factor is the finite life of these poles, and most of them in North America are nearing the end. So, SJ could enjoy a ramp-up with more infrastructure spending.

The parent owns the majority of the stock has been selling, which is good news. This is much more liquid and you can pick it up. They make rail ties and utility poles which are moving into a major phase of the cycle to replace them. This is more good news. They plan to acquire.

He feels it is a well-run company. Customers have to buy their products. The price can get expensive based on earnings multiples, so be careful at this level. (Analysts’ price target is $54.66 )

Stella Jones issued new stock, diluting the stock. On the chart, the stock looks as though it is breaking the uptrend. An uptrend usually shows higher highs and higher lows. Stella Jones has been showing flat highs, rather than rising ones. If the current decline goes a little bit lower, it will have broken through the recent lows and probably will continue to go lower. It is not an outright sell now, but I would not enter it with new money.

They own it and like it very much. Leader in railway ties and utility poles, not the most exciting businesses but very profitable. They are expanding in other verticals such as residential lumbers in the U.S. in particular. 6% free cash flow yields on 2018 numbers. Management has a great track record. Opportunities for growth across different segments. Directors are big shareholders and own 40% of the business still. They have cash flow to increase dividend, but thinks they should be spending their money to allocate capital to best return opportunities for shareholder over the long term.

A really, really good quality company. He likes being conservative, and earlier this year the company said it is not going to be quite as hot as they thought, but then came through and delivered the goods. There is a shift of spending in those industries, and they are very well positioned. Made some great acquisitions, vertical integration and drove down costs. A solid name you don't have to worry about.

(A Top Pick Oct 20/16, Up 11%) Still a core holding. Railway tie replacements can be cyclical and they saw softness in 2016. They are successful in acquiring companies and consolidating within their industry. He expects them to be active on the acquiring front.

(A Top Pick Dec 20/16. Up 17%.) Thinks the world of management. They haven’t had the best year in terms of revenues and profits. Mainly in rail ties and utility poles. Utility poles have been excellent, but rail ties has been kind of lumpy. This will grow with GDP, but they are able to use the excess free cash flow to make more acquisitions.

This went into a bit of a stall, in part due to the railroad situation and confusion of commodity traffic. The picture is not absolutely clear as to whether the railroads are as keen as they used to be. They constantly have to replace the ties. It is very well-run. Very, very good Canadian managers.

(A Top Pick Sept 30/16. Up 11%.) Recently got into the lumber business along with their telephone poles and railway ties business. That was well timed as lumber is now hitting new highs. More of a “steady Eddie” stable type of name. Pays a decent dividend. Right now, railway ties are soft, but will come back.

It is a boring company, making railway ties and utility poles. You know demand is going to go there. All they do is make money.

He likes the company, although would not buy it at the moment. In the last year it has softened up a little. He would try to look for an entry point based on a pullback and/or the financials improving.

They are mostly railway ties and utility poles. They will not be greatly impacted by additional infrastructure spending. They will benefit from the replacement cycle. It is not cheap. He was looking to get back in in the mid-$30s, but never did. It is well managed and their acquisitions were very accretive. There has been a slowdown in the sector and some margin pressure due to inventory builds.

This doesn’t show up well on his screens. Earnings growth has really slowed, so he has a small Short on it. The railway ties are tied to oil/gas and infrastructure in Western Canada. He would stay away from this.

One of the better companies on the Canadian market. Utility poles and railway ties. A stable business. The railway industry has to continually replace ties, so they kind of have an installed base of demand going forward. A bit cyclical, so right now they are having an issue where there is just not a whole lot of demand. However, revenues are still coming in. They’ve been acquisitive in the past, and he feels they will look for more acquisitions in the future. This is cheap, and it is going to do well long term. Worth holding.