Richelieu Hardware (RCH-T)

Very good operators and acquirers. Post-pandemic funk, excess inventory had to be marked down. It'll take time for things to normalize. Murky construction and renovation outlook in US. More housing activity may be a good time to step back in.

He recently sold it around $44, buying earlier around $35-39, because their latest results disappointed. They stocked on products post-Covid due to supply chain problems to gain market share; not a bad strategy. However, they've been stock with costly inventory, so they've had to discount that which really shrinks their margins. Well-managed and consolidate peers well. Long term you will make money, but this go sideways for a while. Zero/no organic growth. Maybe you can buy on dips, if you're long term.

Are tied to home renos and there was huge pent-up demand coming out Covid. So, RCH stocked up on inventory and gained market share. Was up 30% last year, but last week they reported lower margins that will persist given excess inventory (that will last a few quarters). So, he took some profits around $45, but will buy them back. A strong balance sheet and track record.

RCH missed 4Q earnings estimates (50c vs 53c expected) and this resulted in National Bank downgrading the stock. Sales of $453M were 2% higher than expected. Margins were reduced by expansion, but this also is setting up future growth. Disappointing results, but not a disaster. 10% growth is still expected in 2024. 
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A strong home renovation cycle will push shares higher. Good profit margins, balance sheet and returns. Managers own a lot of shares. More room to run.

It is high quality company and they have added it to the portfolio in the past 6 months. It has been weak because of the sector. They sell storage systems etc. and are very well managed. There is a big backlog in the home renovation sector. It is also buying back stock.

Thesis remains intact. High quality. Benefited during Covid renovations. Now stock's over-corrected. Usually trades at a premium. Now at an attractive multiple. Significant pullback gives a good margin of safety in the face of economic slowdown.

Has compounded 8x over 15 years. They make specialty hardware, growing organically and buying other distributors then adding product lines (i.e. kitchen cabinets). Just reported record profits. Stocks fell 25% last year when he bought it. Has fallen out of favour, because it is tied to housing, though sales are tied to home renovations through contractors (not hardware stores). Huge backlog for contractors and manufacturers for home renos. Very well-managed and strong balance sheet. Trades at 16x PE only. Have been buying back a lot of shares.