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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I want to make sure that I am not overrating SJ. I try to buy quality companies and I have owned this one for several years because of the many positives you and other analysts have given it. One of those positives was management and with a new CEO and the selling out by Stella Jones International I am wondering if management may have regressed.

The latest results seemed solid in that guidance was maintained while sales and margins increased. I am thinking that it is the decrease in profit is what is weighing on the stock. Management says that the decrease is due to the transitioning of a Class 1 railroad company from a treating services only contract to a full service "black-tie" program and they go on further to say that they bought untreated ties from the Class 1 company and once they treated these ties they didn't make as much money due to higher costs. If I remember correctly, this is the same problem they said they had last quarter.

First, do you know what this program is all about? It seems to me that the Class 1 company is moving to a full-service on-going type of contract rather than a bare-bones contract to contract scenario. Ongoing regular revenues are usually better for a supplier so why is this one costing them money? Short-term pain for long-term gain? Or a management snafu?

The second drag is operating costs in the US southeast. Again, did management make a mistake or is this just one of the integration hiccups that come with takeovers? So I am back to my earlier comment about whether management is not what it once was or are these just growing pains. SJ has always been a lumpy stock mover and should I just view it as being out of the limelight for the time being with better things to come?

Appreciate your insight.

Paul F.
Read Answer Asked by Paul on August 09, 2018
Q: In May and July, a couple of members wondered if it was time to move on from STN (and go to WSP) due to non-performance and you suggested it was. do you see anything in this earnings report to suggest a turnaround? I admit to a bit of emotion on this one as STN was once of the first stocks I ever bought. But continuing problems with "legacy" contracts has me questioning management. Time to give up the ghost on this one?

Appreciate your insight.

Paul F.
Read Answer Asked by Paul on August 09, 2018
Q: this covalon thing is a bit distressing all because of a tweet by this freeland character who seems completely out of her element whether its nafta or anything else.the conservatives are looking better everyday but that is not the point.
the point is the saudis have said they will not do any new business with canada and seem to emphasize that existing contracts stand as is.so why the massive sell off in covalon, is it just retail investors panicking— probably mostly 5i members and just after you had it as a top pick on bnn.
the stock market can be a crazy place where a tweet can cause such a sell off in a stock. please comment.dave
Read Answer Asked by david on August 08, 2018
Q: Hi 5I team
Will you be continuing to hold Magna in the balanced equity portfolio or are there better options to replace it given the companies comments or reduced expectations? It is a time like this I will ask the question you taught me "Has something changed?", I think it has but it is surrounding trade which is temporary. How do you value the company going forward?
Thank you
Jeremy
Jeremy
Read Answer Asked by Jeremy on August 08, 2018
Q: Hi,
Thanks for the past tips to get into Savaria, I’m up 70% on it right now. They seem to have a hard time breaking through $17. Do they have anything solid in the works that you think will push it higher with support or do you think the best part of this ride is over? I haven’t held it long and don’t need the cash for anything, but would like to see continued solid returns. I know the returns here aren’t typical, but do you see somewhere else to better send the money or is it a hold for a while still?

Thanks
Read Answer Asked by david on August 08, 2018
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