Stella-Jones Inc. (SJ.TO)

A name he had been Short but has now covered. Thinks it has an interesting future assuming all the infrastructure spending the government is talking about does occur. They do a lot of construction in camps out west, and thinks they will be a benefit of pipeline construction and infrastructure spending.

It has been a good performer over the last 6 years. He does not know the recent quarters but they have a good business model. He likes the management team. They own the majority of the industry.

Utility poles and railway ties. An excellent entry point. It looks like demand for railway ties is lumpy and is not going to be the best 3^rd and 4^th quarter, but a railway tie deferred still has to be purchased. This is the only national provider of railway ties and they have to be wood. Utility poles have a 50 to 75 year useful life. Most were built in North America before WW2. He can see 2%-3% revenue growth over the long-term, and at any point these guys can make a smart accretive acquisition, and the stock is going to pop. Doesn’t think earnings are going to be good for the next two quarters, but as a long-term thinker, this is a double over the next 3-5 years. Dividend yield of 0.92%. (Analysts’ price target is $52.94.)

(A Top Pick Sept 30/16. Down .3%.) This is one that you have to think in a 3-5 year timeframe. Rail ties and utility poles have been a bit weak. It is kind of cyclical. They are growing their retail lumber business right now, which has higher growth potential, and he thinks this is getting overlooked in the valuations. Growth potential has never been better than it is today, and yet the valuation is trading below historical multiples.

One of the most consistent companies that you are going to find. Valuations are really good, and the pullback just makes it better.

Telephone poles and railway ties. It grows organically, but mostly by tuck in acquisitions. This has been a good performer over time. Got a little expensive, but is coming into line now. Today’s drop off caught his attention, and he may look at it now.

This is pretty attractive. Telephone poles and railway ties. The stock hasn’t done a whole lot this year, but it is one of the best run Canadian companies he has seen. They have done many, many things right for a long period of time. Have done very nice acquisitions, and are positioning themselves for growth.

This is reporting next week. She has trimmed her position a little. When they reported last quarter, they were making noises that next quarter might be a little slower than normal, especially with Canadian National Railway (CNR-T), which was experiencing slower traffic, allowing them to update rail ties sooner. This 3^rd and 4^th quarter might be a little weaker than Q1 and Q2.

He doesn’t really like this company. They are in the business of selling rail ties and selling wood for telephone poles. Pretty basic simple businesses. He is not sure about headwinds with the slowdown on CapX on the rails side. Telephone poles is a pretty steady business, but not a fast-growing one. Looking at the valuation metrics, this is not a cheap stock.

It is a hold and when it cheapens up, he will buy a position. Don’t acquire as a position at this valuation.

Railway ties and telephone poles. Their cash ROE is about 22%. The stock price hasn’t done very well of late. In their last quarterly release, they announced that subsequent quarters would not be as strong as what the street was expecting. A very, very well-run company. They have low single digit organic growth for existing businesses, and have leveraged the free cash flow by making accretive acquisitions. Not a lot of competition in this area. Dividend yield of 0.88%.

These are poles for utilities. This has been very, very steady. One of those companies that you want to be in, because they do very well and there is not much competition.

Railway ties and utility poles. There is a kind of steady consistent demand for their products. Thinks the recent pullback has been due to the chunky contract nature with utility poles. However, what is being overlooked is the lumber side of their business. They are getting into the residential lumber in the US, and their most recent quarter had some pretty good growth in this business. Their prospects have never looked as good, and yet the multiple is trading below their historical multiples. Dividend yield of 0.88%.

He sold a little too early. There are still acquisition candidates out there. You are paying a high price for the acquisitions they are making. It never seems to get cheap enough for him. It is well managed, but not cheap.

He is primarily a growth investor. He looks at dividends as part of the total return. This company has about 40% of the railway tie market and 30% of the utility pole market. It is dominant in its industry, but their organic growth rate has slowed down. They say they can continue to grow for approximately the next 5 years despite the slow growth.