Hardwoods Distribution (HDI-T)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The sector and in particular the company has shown good momentum. Good cash flow off-sets their stretched balance sheet. Cheap on valuation. Unlock Premium - Try 5i Free

Home Building. They have quite a bit of operations in the US. which he thinks are going to benefit from the tax bill that was passed. Really good quite consistent company as well. (Analysts’ price target is $24.50.)

(A Top Pick Dec 20/16. Up 8%.) This sells value added lumber products, mainly in the US, but also in Canada. We are just at batting practice for a housing boom in the US. There are more millennials then there are baby boomers, so this company will benefit, as 60%-70% of their revenues are tied to residential housing.

This does high-end panelling, flooring, etc. They have a very good grasp of the high-end market. Chart shows several years of higher highs and higher lows.

Value play or value trap? This is not a value trap. It builds wonderful kitchenware and stuff to entrap the American consumers. He’s in this for the long-term.

Latest results were a disappointment, and the stock sold off. Analysts have said the 9% increase in earnings, even though sales went down 4%, is something not to get worked up about. Because of the higher ranking and what the analysts have said, he thinks this will do quite well.

It has a 1.5% yield. They distribute the end products that go into boats, RVs and kitchen cabinets. It is tied to the housing cycle and the demand for RVs and other luxury items. He would be more comfortable with pure play lumber stocks.

(A Top Pick March 28/16. Up 1%.) This had an amazing 2015, but 2016 not so much, although fundamentals have been very strong. They transformed their business in the last 6 months. Made an acquisition of Rugby. They used to only sell flooring and value added hardwood lumber goods, but now it has thousands of skews of different products such as commercial real estate, construction, etc. mainly in the US. This is still a Buy.

High-end hardwood. Big participation in the US housing market. He is looking for stocks that are not just commodity, but are a bit value add, and this one fits into that category. He is still bullish on this.

This used to be a distributor only of value added wood products. It made a big acquisition of a US company, and now also sells architectural building products. It supplies products to both construction for residential housing, as well as products into Home Depot and Lowe’s. If you believe the US housing market is going to continue to recover, this is a good, long term play. Very cheap valuation compared to some of its US competitors. Dividend yield of 1.39%. (Analysts’ price target is $23.83.)

(A Top Pick Nov 13/15. Up 15.57%.) The lumber business, but high end, for the construction business in the US, particularly in home renovations. They make high end, very high margin products. Have good penetration and seem to be growing their market share.

(A Top Pick July 26/16. Up 3.88%.) Wood for fancy furniture, renovations, high end floorboards, kitchen renovations. Renovation is one of the stronger subcomponents in retail sales reports.

One of the largest distributors of lumber in North America, mainly higher grade lumber. Hardwood is in cabinets, high-end flooring, etc., so it is really benefiting from the strong US housing industry. Looking at the retail sales of consumer reports, home furnishings and renovations are the strongest subsectors in consumer behaviour. Thinks they sell 75% of their product to the US, so as the Cdn$ depreciates, this company will do well. Dividend yield of 1.22%.

(Top Pick Sep 2/15, Up 0.56%) He is still pretty enthusiastic about it. High growth and high margins.