Can This 40 Year Old Building Supply Company Grow in Multiples?

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Can This 40 Year Old Building Supply Company Grow in Multiples?

We are long shares of a 40-year-old building supply company who is a leading distributor of building products in North America. This company’s revenues are dependent on housing starts and to a lesser extent the home remodeling market. This is a cyclical company — a style of company I’m not usually fond of — but there is some hidden potential. They were layered in debt coming out of the financial crisis in 2008.  But the company has been aggressively selling assets to reduce the debt load and has now reached what I believe to be a major inflection point in their turnaround.

We initially established our long position in August of 2016. It has been part of our “Buy on Pullback” Mock Portfolio 3.0 since October 2016.  On October 19, 2017 we also added it to our “Buy on Pullback” Mock Portfolio 6.0 on a selloff that was based on a non-dilutive financing. Shares are selling well below the valuation of its competitors and where it used to trade before the global recession.

Potential Return Multi-bagger

Asset Class Common equity

Industry – Building Supplies

catalyst50

CatalystsLong term restructuring; Avoiding bankruptcy

mc50

Market Cap –  Small cap

It appears that the company’s recent Q4 2017 results have attracted some insider purchases, the first wave of buys in a long time. The company also has a majority of its cost restructuring initiatives behind it, which have turned from a headwind to a tailwind. They have also now reported two straight quarters of top and bottom line improvements and they seem well-positioned to continue this trend in 2018. On the Q4 2017 conference call, management stated that they are in the third inning of their comeback story. Now that costs are under control, management can focus on top line growth.

More information on this stock can be found at Geo’s Pro Portal.

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By | 2018-03-07T14:27:40+00:00 March 6th, 2018|GeoTeam Research, Hot Research, In Depth Research, Spotlight Research|0 Comments

About the Author:

GeoInvesting is an investment research boutique in Skippack, Pennsylvania The GeoTeam's focus is on providing high quality stock market research tools and in-depth due diligence on U.S. small and micro-cap equities and on Chinese companies trading in China and the U.S. We research long and short ideas, and are the leading research boutique charged with helping investors navigate the treacherous China equity universe with a paramount goal toand protect portfolios from frauds. Numerous notable media outlets have credited GEO We have been credited with exposing numerous fraudulent companies in China. We have built a reputation in the US small and micro-cap space as champions of transparency. On the long side, we have also developed a , with a knack for picking stocks that have the propensity to get acquired at attractive premiums to their current prices will be acquired. Our team is currently comprised of 13 analysts and traders, and 7 on-the-ground researchers in Mainland China.

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