Stantec Inc (STN.TO)

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.

There is a demand for infrastructure, and there's spending to be done. He prefers the engineering companies that provide the services to build the infrastructure, such as this one. Infrastructure builds across NA. Big holding for him.

WSP and STN are the top 2 companies in Canada. Serial acquirers. Hasn't invested in this area since burned by SNC-Lavalin. He doesn't have the same conviction for disciplined acquisition prices, or the same conviction for high ROIC, as he does for other industries.

Likes the sector of engineering services, instead of construction. 77% of STN revenue comes from NA. She owns WSP. Nothing wrong with STN, though it's smaller. Since STN is smaller, it might be able to grow faster.

WSP revenue from NA is 50% or slightly below, so it's more global. Starting to see organic growth pick up from its bigger acquisitions in very attractive markets. Growth profile slightly better.

Both grow organically and through M&A.  Both have balance sheet support to do M&A.

EPS of 82c missed estimates of 86c; revenue of $1.24B was 1.4% better than estimates. EBITDA of $194.6M was 4% short. The dividend was increased 7.7% and a very large battery contract was announced. EPS was flat year over year. The CFO is also retiring. Backlog is $6.3B, up ~7%. Not a perfect quarter, but the contract and dividend bump are positive signs. We would consider the outlook still quite positive overall. 
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It is winning across the board in infrastructure spending. Engineering in general is the place to be.

He's always cautious. Tremendous number of acquisitions, which they've done well. Window's been open for capital in the space. Sometimes the market will love it and leave it if they make a mistake. 

If you already own it you probably own enough, as it's done so well it has to be a bigger weight in your portfolio. Wait to buy more, don't double down at these prices.

Valuations are roughly comparable, and rich. WSP is bigger and more global. If you own WSP, don't sell, let it keep working. Access to capital for WSP is favourable. 

Return on STN has been better this year, but that's because it was undervalued coming in. A switch wouldn't be that helpful.

Sharpened its focus and expanded exposure to environmental and water. He's been adding, if needed, to rebalance portfolios. Add a half position now, add more on weakness.