1- I was wondering if you can confirm my understanding that most of what they sell in USA is produced in the USA which, in theory, is thus exempted of Tariffs.
2- My understanding of the stock is that it could be a good defensive stock in case of volatility in the stock market since it is mostly an infrastructure stock, do you agree on my assessment?
3- The stock is down 15% since last week earnings. Am I missing something that could explain of that significant short term plunge in the stock? It seems overdone and I want to think that most of the downside is already priced in the stock. The stock seems offering a good entry point since the stock is now trading more than 30% below all time high however one key trading lesson is to avoid trying to catch a falling knife. What is your opinion on the potential upside for the stock.
Thanks in advance! Feel fee to take as many credits as needed to answer these questions.
Regards
Michel
Stella‑Jones publishes facility counts and describes capacity by product lines (poles, ties) in its annual reports and investor slides, but it does not give a single consolidated "U.S. capacity (units or volume)" figure. But it has more than 40 facilities, and has added many of these through US acquisitions. SJ has not noted a material impact of tariffs often and we think it is general safe via its US production base.
2) Generally. The company's customers tend to have 5-year capital spending plans, and poles and railway ties need to be replaced regardless of the economy. Earnings have held up fairly well in past recessions, and even in 2008 and 2009 EPS increased slightly. 3) Earnings did miss estimates, and subseqent to earnings it did get several broker downgrades. The stock is down on this for sure, but also it may just not be exciting enough for the current market backdrop. It is cheap at 12x earnings, with a good dividend, and is still up marginally over the past year. We think there is decent upside potential (15% or so) for patient investors stepping in.