Steve BelisleStantec IncSTN.TOPAST TOP PICKDec 29, 2016

Market fear that AI will dispense with these businesses just doesn't make sense. Instead, they'll be able to utilize the tools of AI. The AI narrative's just gone too far. Well-positioned. Own it with a 3,5,10-year view.

Doesn't own any pureplay engineering stocks. Always tend to be too expensive. Bid up on future infrastructure needs. 

See his Top Picks, one of which has a division devoted to engineering services.

Trend is to create environmental improvements and remediation. Just won a contract with a Scottish water enterprise to upgrade water and wastewater infrastructure. Good entry point. Good 10% growth expected, both in profits and dividends. (For dividend growth, this is about double what publicly listed companies worldwide offer.) Yield is 0.65%.

Question was on ATRL which he does not follow, so he proposed to compare STN vs. WSP

The two names he follows most closely are STN and WSP. He goes back and forth as to which he prefers. Both very well run. He wants pure engineering and construction, which are positioned where he likes in the infrastructure spend cycle. Very attractive profitability and cashflows in their services businesses. Valuations are almost identical, as are the FCF yields and growth profiles.

He might lean just slightly to STN, as it's a little bit smaller and so it has more room to grow.

Sector should have some growth with planned infrastructure spending. In the space, he prefers larger companies like this one in terms of safety, especially as we don't know which way the economy's going to go in the next couple of years. Large companies also have a global footprint, so US tariffs are not as much a concern.

Banner earnings report. Revenues are growing faster than analysts expected. Into environmental architectural projects, especially in Canada and US. Up 25% YTD. Long-term compound annual return would be ~15%. Right spot, right time.

Attractive name. Global. Pure design, before projects are even built.

We continue to like STN, but at the time we felt its valuation was lofty relative to its historical averages, and we were looking for higher growth opportunities elsewhere. We think it is a solid moderate growth name, and for a long-term investor, we would be comfortable holding it over the long term. It can go down along with the market if we continue to see declines for the TSX, but it has a strong history of margin expansion, revenue growth, and free cash flow growth.
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Services aren't goods, so they won't be subject to border tariffs. Engineering services have secular growth opportunities. Meaningful US position, and US is growing faster than Canada. Much revenue comes from government, and is a risk, but doesn't negate the strong secular tailwinds.

Owned it years ago. Run well, acquires a lot, and profitable. Growth has stalled, US tariffs are a question, but should do well.

Canadian engineering firms have a strong business model in Canada, and they're continuing to expand outside Canada; lots of opportunities to do well. Buy a bit now. If price goes up, you'll be happy you got in earlier. If price goes down, buy a bit more to average down. 

Big fan of the space, especially with the incoming US administration. This name had done a tremendous job over the years. But take a look at ATRL.

Great environment for engineering and similar services. ROE is ~13%. PE's of all these companies are getting up around 40x trailing earnings. Rather fully priced. Very good exposure to the US, and the USD is strong and likely to remain so for a while.

In a trade war, services may not be as badly affected as some products, so these companies could be somewhat of a haven. 

Lots of infrastructure spending to be done. Today in the space, he'd prefer WSP (which he owns) over STN, but the whole group looks really strong.

A true compounder in Canada. Respects management, but it's fallen from its summer peak due to profit-taking. It's a buying opportunity now. Will grow earnings in double digits for many years. Are exposed to the right verticals. Fine management.