lundi 16 janvier 2017

Stella Jones: the right time to buy?

Today, Stella Jones (SJ.TO) was down a lot due to a major drop in guidance.

Some people say it's a good time to buy because of the 8-10% correction.

I don't think so. Usually, when the operating income of a company drops from 48 millions dollars to 28 million dollars (which is the case for Stella Jones), it's not a signal that the price of the shares will go up. EPS will almost certainly drop for more than 8-10%. So, on an EPS basis, Stella Jones is probably more expensive today than it was one year ago.

If you think that 2017 will be a good year for Stella Jones, you're probably wrong. I don't think it's a momentum pick at all. Sorry for all those who thought that SJ would be a great pick for 2017. You still have 9 picks to save your portfolio.

But anyway, Stella Jones is a great business run but a brilliant manager (Brian McManus). It's one of the few canadian stocks which is a buy and hold for many years. It's like Novo Nordisk to some extent: A great business that goes through tough times but that should still be there 10 years from now... and that should make much more money. But unlike Novo Nordisk, Stella Jones operates in an industry where the regulation is almost absent, which is a great thing for us, investors.

So, if you want to build a solid portfolio of stocks run by a handful of great managers, Stella Jones is a pick for you, along with Metro, CGI Group, Richelieu Hardware, Canadian National, Alimentation Couche-Tard and some others.

But don't expect anything for the year ahead.

5 commentaires:

  1. I don't really follow this stock but I did notice there seemed to be a lot of meaningful buying after the initial sell off yesterday...just food for thought.

  2. SJ is a position I wanted to open for a long time.

    Yesterday I finally got the opportunity to invest with probably one the best manager in the country at a fair price.

  3. Stella Jones is a great long-term hold. This looks like a great entry. (Long-term stock holder)

  4. What is the valuation on SJ? Price to forward cash flow?

    1. With the new guidance, I'm not sure. I'm waiting for the next results to see.