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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: Hi there

I have held Shawcor through the downturn and have a long term view on my investments - I can wait a few years for recovery. Just wondering given the poor outlook from the company for the next year and the poor outlook on the sector whether its valuation reflects this. Would it be a hold here or would you move on. I do think they have a bit of a unique boring business - a bit like Stella which I also hold.

Thanks

Stuart
Read Answer Asked by Stuart on May 13, 2016
Q: hello 5i:
in a recent question, asked by Justin, about the new Liberal gov't (hmm, interesting, I know his last name can't start with T), re: infrastructure plays, you advised that WSP, STN, SOX, AND BDT would be some companies that would benefit. I can see that, but wouldn't companies like SCL and BAD benefit even more? After all, they will be doing the groundwork where most of the money is spent and have the lowest valuations due to the hits they've taken.
Just wondering
Paul
Read Answer Asked by Paul on November 02, 2015
Q: I am wondering about pipeline coating companies, as they should be in demand regardless of the falling price of oil. SCL and EFX appear to have the best fundamentals in the sector, given their payout ratios, price/sales and price/book and both are significantly down over the past 12 months. I am wondering: 1) is this a good sector given a 2-5 year time frame; 2) are these the 2 best companies in the sector to consider; and 3) which one would you choose if I only bought one, and why? Thanks in advance.
Read Answer Asked by Stephen on August 07, 2015
Q: I know that SCL is not in your coverage list but I would appreciate your perspective and insight regardless. The quarterly release a couple of days ago did not seem that bad given that drilling is down 50% so there are delays in capital spending all over the place in North America (I know that they are not tied greatly to drilling activity but it is a good proxy for the near term sector activity). I also understand that the NDP win means head winds for anyone involved in pipelines but that was last week's news. Earnings seemed ok but the stock is down over 10% in two days so I am not sure if I am missing something. I cannot see short interest so I don't know if it is long term investors exiting or the shorts smelling an opportunity that has caused the price drop. Their business model seems solid ND with some diversification. They issue stock rarely but the last time was last year in the mid to high $50's, well above today's levels. I would appreciate your thoughts. Thanks for the great service!
Read Answer Asked by Derek on May 15, 2015
Q: Hello Peter and team,

The carnage in the energy sector continues, so it is time to see where my non-registered portfolio really is on its energy weighting. Please help me understand if I am really overweight in energy. I know it is a personal choice what percentage of a portfolio is exposed to energy, and the numbers being tossed around are 10% to 15% being ideal for most investors.

If I use the TMX sector categorization then I have 33% of my portfolio in energy. As of the close on Nov 13th the stocks are:

PPL (+52%)
IPL (+37%)
ENB (+29%)
WCP (+22%)
SCL (-3.5%)
CPG (-7.6%)
SGY (-10%)
TOU (-18%)

But your sector categorization is a little different. You consider PPL/IPL/ENB as utilities, and SCL seems to be a basic material. If you slice it that way my energy component is 16%, utilities 14%, and basic material at 2.8%

When you say a weighting in energy of around 10% to 15% is ideal, would you include the pipelines, and material stocks like SCL in that weighting?

Which one(s) would you trim or eliminate to reduce the energy weighting?


Paul J.
Read Answer Asked by Paul on November 14, 2014
Q: I have roughly a 14% position in Altagas (ala), Pembina (ppl), and Interpipe (ipl), collectively. I was thinking of selling one entirely or part positions in all three and using a portion of those funds to purchase Shawcor (scl) which is trading around 12.45x 2015 earnings.

To make up for the lost dividend income, I plan on purchasing Sunlife (slf) as I only have a 1.85% exposure to the insurance sector (I have pwf).

Any thoughts? Thanks again, as always.

John
Read Answer Asked by john on October 22, 2014
Q: Hi Peter and gang.

Question: Shawcor (SCL). I already have a 16% position in pipelines (Altagas, Inter Pipeline and Pembina). However, Shawcor (SCL) is looking extremely attractive, in my opinion, with 2015 consensus earnings, according to CIBC, of $4.35 and substantial growth continuing in the years after.

In your opinion, do you think I can hold my 16% position in my pipelines and add a 2.5% position in SCL? My reasoning is, I can buy SCL as well as hold my existing pipelines because SCL has a forward p/e of under 13 and strong earnings per share growth to support its share price. When interest rates rise, my IPL, PPL, and ALA, may experience a decline because of their very high p/e and slower growth rate but SCL could act quite differently because of its attractive valuation and growth profile.

My other option is to trigger large capital gains and sell a portion of my existing pipelines to buy SCL.

I'd appreciate hearing your thoughts. Thanks, as always.
Read Answer Asked by john on September 21, 2014
Q: Is it too late to buy SCL? I started watching this company in early February, and was trying to pick up shares just below $40 but it never got to my purchase price. I have been watching it go up higher and higher ever since, and now it is over $60, that would be a 50% gain had I been able to buy at my (stubborn) price of below $40.

How strict on purchase price should I be when I decide I like a company and want to buy its shares? Should I be rigid and stick to my pre-determined price, or should I just buy at market price once I decide to acquire a position in a company (with a minimum of a 1 year hold)?

I still like SCL, and wish I had purchased it when I made the decision to buy some shares. Should I just buy SCL now at $60, or give up on it since it has had such a large run up, and find something else I like?

Paul
Read Answer Asked by Paul on July 03, 2014
Q: Re: SCL.TO
Shawcor had a great run recently,not so coincidentally the company is preparing to raise capital. Maybe the company is just preparing for some acquisitions or expansion. The valuation seems like is not very rich consider the company's position in its area. I have a position with 35% gain. So what's your take?

Thanks!
Read Answer Asked by Dong Sheng on June 05, 2014
Q: Hello Peter & 5i Team, I write about Shawcor SCL. I have a 30% gain in SCL having accumulated these shares since July 2013 and I wonder if I shouldn't exit the position or at least take some profits? It was only in January when the company warned on Q4 coming out with bad news inconsistent with strong pipeline industry performances. Then we received a positive surprise with a strong Q1. I like the 30%+ ROE, cheap 2015 forecast PE of 11.5x, P/CF of 8.1x and expected cash balance of $500 million end of 2015 (TD Waterhouse forecasts). Is the business that volatile and does management not have better visibility to have predicted this surprising turnaround only 3-4 months later? Thanks for your reply.
Read Answer Asked by Keith on May 05, 2014
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