Stuart Olson Inc (SOX.TO)

Within the engineering realm of companies, this is a little bit higher risk/higher return kind of scenario. Believes they will survive. They have worked through a lot of their projects which had fixed-price contracts. Have higher priced contracts coming on stream going forward. Unfortunately, they do a lot of work in Alberta with a lot of it tied to the energy patch. For that part of your portfolio where you are willing to take a little bit more risk and perhaps hold it a little bit longer to seek a higher return, this is all right. Dividend of 7.8% is probably fairly safe for the time being.

Being overly punished for some of its past transgressions. They are now suffering from being Alberta-based. A riskier stock than some of the others in the industry. It is a much smaller company so your risk-reward parameters are a lot greater. If things start going well again, you could see this stock increased significantly. At current price levels, it is probably really good value, but it is hard to know how long it will take to see that value surface.

Amongst the construction companies, this may be considered one of the higher risk/reward members. It has come off so much as a large part of their business is tied to the energy and mining markets. However, on the infrastructure side we are seeing growing backlogs. Thinks management has made some significant changes in the structure of the company and how it is exposed. It has a very good chance of making it through this environment and there could be considerable capital appreciation, but it is not without its risks. Feels the dividend of over 7% is all right for the time being. If he sees more and more projects delayed, particularly in the energy side, they are going to have to examine that dividend in probably 2 or 3 quarters out.

Essentially construction engineering, primarily based in Western Canada with significant exposure to the oil/gas sector. Also, a lot of projects that may have been earmarked as infrastructure in Alberta, are possibly going to be delayed or potentially cancelled. He would be very concerned about this. He is Short this position.

A lot of their projects are somewhat oil and gas related. However, they have been diversifying lately with new purchases. Right now the price just reflects too much doom and gloom. They have a good chance of turning this around in the next year or 2. He would still be a buyer of this today. He is hoping for an upside of $12 or so over the next couple of years, whereas he used to have a much higher target.

This and Aecon Group (ARE-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.

Had some problems a couple of years back with fixed price contracts that went way over budget and really hurt their bottom line. That has been working through, but not quite as fast as people had hoped for. Believes they are writing newer contracts that are going to be at better margins going forward. Commercial and industrial divisions have been doing a lot better recently. This is going to be a matter of time. As non-profitable contracts drop-off and newer ones come into play, he feels management is going to be very diligent in seeing that these margins come through. In the meantime, you are being paid a very generous dividend. Feels it has very good potential for capital appreciation with very limited downside risk. Wouldn't be surprised to see the stock well through $10-$12 in the next couple of years.

Amongst the construction companies, this is a smaller player. Has a higher risk profile, but at current levels it is a good risk/reward trade off. They have got a building backlog. Dividend is currently about $0.48. Earnings over the next couple of years, as they move into higher margin contracts, will be back again. A compelling valuation.

A number of years ago they acquired a company that had a number of fixed price contracts that really went over budget and punished the company. Those are finally being worked through and are now sitting with a record backlog. As that backlog develops, he expects the margins are going to go up. Thinks we can see significant appreciation on this. Dividend yield of 4.71%.

(A Top Pick July 22/13. Up 12.51%.) He keeps hoping to see a bit more out of Churchill. This company got into a lot of trouble 3-4 years ago when a lot of their construction projects had huge cost overruns. Those have mostly run through the system, and lately their backlog has been building. There will be an improvement in margins as the new backlog works its way through the system,. Thinks we can still see some fairly significant capital appreciation on this company.

They have really, really struggled. They had a messy acquisition and burned through a lot of capital. He would be looking to buy them. Look for a spot.

Is a recovering construction company. Made some acquisitions and got hurt badly. Going forward thinks they will pick up more business. We could see some significant appreciation form here.

Churchill Corp (CUQ-T) or Bird Construction (BDT-T)? Would have a hard time choosing between these. They have different components. This one has been a disaster over the past 5 years. However, their margins appear to be bottoming out here and he doesn’t think the stock is going to go much lower. Big question here is, when do they start performing. He is starting to watch and monitor this now but is nowhere close to Buying. If they started getting out of some of their low margin locked in contracts, it would be time to very seriously start looking.

(Market Call Minute.) Thinks capital spending for the engineering companies is slowing down a little bit.

(A Top Pick August 27/12. Down 5.01%.) Had some particular problems inherent to Churchill. Had made some acquisitions a couple of years ago that really went sour. In the meantime, there have been some management changes and he thinks things are finally beginning to pick up. Recently there has been some insider buying again. Would look at this as an opportunity.