Stella Jones (SJ)

Stella-Jones Inc. produces and markets pressure treated wood products in Canada and the USA. It offers railway ties and timbers for railroad operators; and utility poles for electrical and communication companies. More recently the company has branched into residential lumber. The company was founded in 1992 and headquartered in a suburb of Montreal.

Once again, we have a company in a pretty boring industry (I mean it doesn’t get much more mundane than telephone poles!) that has low to middle single digit organic growth and uses its excess cash flow to be a consolidator in the industry. The demand for their traditional railway tie and utility pole products stems more from replacement demand than that of new construction. As an example, the life cycle of a utility pole is 25-50 years after which time they must be replaced. As we can imagine the existing business doesn’t require a lot of capital; there isn’t a whole lot of innovation in the utility pole business! They have therefore been taking the free cash flow, that the business spins off, to become serial acquirers in the industry. Since 2005, the company has made at least one acquisition per year except 2009. We have held since inception (Sept 2014) buying at $29. We added to the position in August 2015 at $44 and while the Stella Jones stock has effectively traded sideways since this time, we continue to hold an overweight position, and are confident that our patience will be rewarded.

About Us

Mike Preto and Jason Del Vicario are Investment Advisors at HollisWealth, a division of Scotia Capital Inc. Based in Vancouver, BC, Canada, they work together in bringing a unique approach to managing money to ensure their clients are financially prepared for their retirement. They can be reached at 604-895-3349.

This article was prepared solely by Michael Preto & Jason Del Vicario who are registered representatives of HollisWealth? (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views and opinions, including any recommendations, expressed in this article are those of Mike & Jason’s alone and not those of HollisWealth. ? Registered trademark of The Bank of Nova Scotia, used under licence.

This post is for informational purposes only. There are risks to investing in stocks and investment decisions must take individual circumstances into account. Please consult a professional advisor.