Exco technologies (XTC.TO)

In the 80's, there was a british band called XTC. They made strange songs. But some of them were great, like "Making plans for Nigel" (1979), "Senses working overtime" (1982) and The Ballad of Peter Pumpkinhead (1992).

Excstasy is also a drug that make people retard.

XTC is finally a small canadian company which is little known... but which looks promising.

This business is a favorite of Peter Hodson (one of the few good analysts in Canada) and the company was in the Donville Kent's ROE reporter of last january, being part of the list of fastest growing companies in Canada (without being cited as a top pick or even a pick).

Exco technologies produces various automative parts (moulds for transmission cases, engine blocks, accessories for the interior of the car, etc.). In many ways, that company looks to me like a Richelieu Hardware for cars.

In fact, even for the numbers, that company reminds me a lot of Richelieu Hardware: good but not great ROE, heavy insider ownership, little debt, steady growth and design of various parts in a field that is a bit boring...

Here's a list of XTC numbers:

• Insiders control 23% of the shares
• Debt free (the debt is almost only short term debt)
• Dividend has increased by 250% in the last 6 years
• 49% of sales in the states, 38% in Europe, 4% of sales in Canada (a Canadian company that should not be affected by Alberta at all)
• 2010 EPS: 0,25$
• 2011 EPS: 0,36$
• 2012 EPS: 0,60$
• 2013 EPS: 0,58$
• 2014 EPS: 0,73$
• 2015 EPS: 0,96$
• Actual PE ratio: 15
• Forward PE ratio: 10
• Actual ROE: 18
• Average ROE last 5 years: 16
• Perfomance 1 year: 10%
• Performance 5 years: 289%

I've came to believe that good but not great ROE business like Metro, Richelieu Hardware, Logistec, CGI Group and probably Exco Technologies offer a possibility to get richer slowly but safely.

I've initiated a position in Exco. I believe that this business will be very rewarding in the long term.