I can’t believe it has been a month since I wrote my first post on JCTCF.
In that time the stock is up 12% after hitting an intraday high of $12.10 which represented a 48% upward move. Also, the company reported quarterly earnings that once again confirmed the potential of the non-wood business to drive earnings going forward.
While the strong earnings in the latest quarter are nice to see they do not negate the fact that JCTCF still gets most of it revenue and profits from selling commodity wood products. Revenues and profitability of this business fluctuate wildly and JCTCF is currently facing headwinds from the slowing housing market.
Despite these very real negatives, it seems that the current valuation and the continued growth of the non-wood products business make the stock attractive. The company announced several store wins for its high end dog kennel line and other non-wood products. This is and example of how JCTCF expects to grow its non-wood products, by getting shelf space from its current customers in the DYI market and from new customers. It looks like another sales channel was opened as the company announced today that they will distributing their dog kennels in Europe. http://biz.yahoo.com/prnews/070807/cltu055.html?.v=101
So how do I look at valuation?
Well, I look at valuation the same way I look at the company -- to me JCTCF at this point is the non-wood business and everything else. The problem is that the company does not break out how much of “Lumber, building materials & other” is attributed to wood and non-wood products so we can only come up with ball park figures.
Based on the latest 10Q (filled on 7/11/07), here is the net income for the last 3 quarters breakdown for each business segment:
JCLC ..................... …......…. $1.531M
Greenwood…......………………$0.79M
Seed Processing ….................$0.220M
Industrial Tools.. ……………..$0.01M
Corporate Expenses………….$(0.99)
Total Excluding JCLC ….$0.912
Estimated net income for non-JCLC businesses in fy Q4 = $0.304 ($0.912 / 3)
Estimated net income for JCLC in Q4 $0.461 (assumes JCLC has same net income as in the previous quarter)
Full Year NI for non-JCLC businesses = $1.22M
Apply multiple of 7.5x (half of SPX current multiple) = $9.12M
Full Year NI for JCLC = $1.99M
Apply multiple of 15x = $29.88M
Total Estimated Market Value = $39M
Estimated fair value per share = $16.38 / share
Apply 40% margin of safety = $9.83 / share
Keep in mind that the company filled an S-1 saying that they are willing to sell shares at $13.33 (this is the $20 price adjusted for the 3:2 split). This is in the ballpark with my rough estimated fair value of $16.4.
I think that at current prices the company provides very good value and substantial potential upside from continued growth in the non-wood product segment. This company has no debt and due to large insider ownership by active management I have confidence that it is less likely to do stupid things. I will adding JCTCF as a full position (8%) to the Best Ideas Marketocracy portfolio.
Going forward, I will be watching the growth and profitability of the JCLC business like a hawk. I will also be watching the extent of the deterioration in the Greenwood business.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Showing posts with label JCTCF. Show all posts
Showing posts with label JCTCF. Show all posts
Aug 8, 2007
Aug 5, 2007
JCTCF -- “Da Bulls” -- Part II
In the previous post I made the case that the only reason to own shares of JCTCF is due to the company’s growth and high profitability of the company’s non-wood products segment that is hidden within the company’s commodity wood business.
I also believe that there is evidence that management--who are the largest shareholders with 37% of the stock and effectively control an additional 16% owned by the ESOP--thinks that the stock is worth a lot more than the current market value.
Now, we all know that a management team that SAYS their stock is worth more than the current share price is easier to find than a Democratic politician bending over for the labor unions or a Republican paying homage to the religious right ayatollahs.
However, I think in the case of JCTCF there is some tangible evidence that management really does believe that a minority share of their little company is worth more than its current price.
The company re-filled an S-1 form in September 2006 notifying shareholders that they are looking to sell 500,000 shares to the public which if completed would increase shares outstanding by 25%. The shares would be sold at $20 per share which based on pre-split figures represented a roughly 50% premium to market price and 170% premium to book value.
There are a few nuggets in the filling that give me a warm fuzzy feeling. For starters, this is being done on the cheap. This is a self-underwritten offering with the company spending $125,000 which is 1.25% of gross proceeds and substantially less than the 6% or so ibanks charge.
Also, I could not find any evidence that management is going to be selling their own shares as part of this offering. This means that management is not cashing out and is willing to accept 25% dilution in the ownership of the company. I can only think of one reason why they would do this which is that they believe the cash can be successfully reinvested (this must surely be to grow the non-wood business) and they will be better off owning a smaller portion of a much larger pie.
Finally, this stock will be sold only in two states Washington and Oregon and only by Donald Boone (who is the President and CEO and owns 24% of the stock), Michael Nasser (who is the Secretary and owns 13% of the stock), and two other directors. They will personally solicit potential shareholders with the “intended offerees will be friends, family, and business associates of the our Management.” The filling does state that a broker-dealer maybe engaged to sell the shares, but I don’t believe this has been done yet.
What is so important about people asking their friends and family for money? This happens every day.
The important part is that when you have to pick up the phone yourself and call someone you have a personal relationship with and ask them for money you think differently about the offering price and the outcome than you would if you let Mr. iBanker sell to Mr. Fund Manager. When you are selling to people you know and presumably want to keep knowing, you are much more likely to charge them a fair price which leaves a lot of room for upside. You are also much more likely to be careful with the money they give you.
I should note that management has been unsuccessful in getting this offering done since at least 2004. Does this concern me?
I am not happy about it primarily because I am bullish on the company and think a lot of money has been left on the table.
However, I am glad to see that the offering price has been increased to $20 from $7 (see 2004 S-1)
Also, as a current shareholder it gives me confidence to know that management is willing to sell the stock to friends and family at a much higher price than the shares currently trade. I think the only reason they would do that and be willing to accept dilution of their ownership stake is that they truly believe their stock is worth more and they can successfully reinvest the cash.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
I also believe that there is evidence that management--who are the largest shareholders with 37% of the stock and effectively control an additional 16% owned by the ESOP--thinks that the stock is worth a lot more than the current market value.
Now, we all know that a management team that SAYS their stock is worth more than the current share price is easier to find than a Democratic politician bending over for the labor unions or a Republican paying homage to the religious right ayatollahs.
However, I think in the case of JCTCF there is some tangible evidence that management really does believe that a minority share of their little company is worth more than its current price.
The company re-filled an S-1 form in September 2006 notifying shareholders that they are looking to sell 500,000 shares to the public which if completed would increase shares outstanding by 25%. The shares would be sold at $20 per share which based on pre-split figures represented a roughly 50% premium to market price and 170% premium to book value.
There are a few nuggets in the filling that give me a warm fuzzy feeling. For starters, this is being done on the cheap. This is a self-underwritten offering with the company spending $125,000 which is 1.25% of gross proceeds and substantially less than the 6% or so ibanks charge.
Also, I could not find any evidence that management is going to be selling their own shares as part of this offering. This means that management is not cashing out and is willing to accept 25% dilution in the ownership of the company. I can only think of one reason why they would do this which is that they believe the cash can be successfully reinvested (this must surely be to grow the non-wood business) and they will be better off owning a smaller portion of a much larger pie.
Finally, this stock will be sold only in two states Washington and Oregon and only by Donald Boone (who is the President and CEO and owns 24% of the stock), Michael Nasser (who is the Secretary and owns 13% of the stock), and two other directors. They will personally solicit potential shareholders with the “intended offerees will be friends, family, and business associates of the our Management.” The filling does state that a broker-dealer maybe engaged to sell the shares, but I don’t believe this has been done yet.
What is so important about people asking their friends and family for money? This happens every day.
The important part is that when you have to pick up the phone yourself and call someone you have a personal relationship with and ask them for money you think differently about the offering price and the outcome than you would if you let Mr. iBanker sell to Mr. Fund Manager. When you are selling to people you know and presumably want to keep knowing, you are much more likely to charge them a fair price which leaves a lot of room for upside. You are also much more likely to be careful with the money they give you.
I should note that management has been unsuccessful in getting this offering done since at least 2004. Does this concern me?
I am not happy about it primarily because I am bullish on the company and think a lot of money has been left on the table.
However, I am glad to see that the offering price has been increased to $20 from $7 (see 2004 S-1)
Also, as a current shareholder it gives me confidence to know that management is willing to sell the stock to friends and family at a much higher price than the shares currently trade. I think the only reason they would do that and be willing to accept dilution of their ownership stake is that they truly believe their stock is worth more and they can successfully reinvest the cash.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Aug 3, 2007
JCTCF -- “Da Bulls” -- Part I
The entire bullish case for JCTCF hinges on the growth of the company’s non-wood products division which is part of the company’s Lumber, Building Materials & Other (JCLC) group. I believe the non-wood products business is a hidden asset and will allow the company to grow the bottom line despite the slowdown in demand for commodity wood products.
There has been several headlines in 2007 that provide a glimpse that things are happening with non-wood products. For example, in January the company announced that it will sell its high-end dog kennels in 900 Petsmart stores. A few weeks later the company announced that they acquired patents and manufacturing rights to a vinyl gate system -- another non-wood product. In February, the company announced that Fred Myer will sell the high end dog kennels in 117 stores.
Here is another positive announcement related to non-wood products in March:
JCTCF “announced that the Company has received initial orders from two large national home centers for the Company's proprietary gate system for wood fences”
That’s a lot of positive headlines that have gone basically unnoticed as the stock is essentially flat year to date. Keep in mind that at the end of 2006 the P/E ratio was at only 12x-13x for a company with ROE north of 15% and almost zero leverage.
Headlines are one thing, but what do the numbers look like?
Here is where things get interesting. EPS for the last nine months (the fiscal ends in August) is $0.57 vs. normalized eps of $0.57 for the same period in fy2007 (the normalization removes a 16c gain in last years figures due to sale of a distribution facility).
So, what’s so great about investing in a company with zero earnings growth? Consider the fact that earnings are still flat while
1) this company sells wood products and the cost of lumber has plummeted. I don’t have exact statistics and JCTCF did not give any numbers in their latest filling but if you were to look at the latest filling from UFPI which I am a shareholder and have mentioned before you would see that lumber prices have fallen by at least 15% year-to-date.
2) its most profitable business segment last year (Greenwood) has experienced a 17% YoY sales decline and profits for that segment are down almost 50%
3) the company made no money in the “industrial tools” business which accounted for 4c of earnings last year at that time
When you consider that all these notable items have been completely offset by the more than doubling of profits in the JCLC segment and that all that increase was driven by non-wood products a different pictures start to emerge.
For the first nine months of the year, sales in JCLC are up only 2% while operating income for the unit is up 140% …..here is the single most important line from the 10Q
“this reflects a sizable increase in specialty metal products that slightly more than offset a sizable decrease in wood products sales. Operating income was up $889,886 [+140% YoY] reflecting the fact that the gross margin on specialty metal products is much higher than on wood products sales.”
I guess I am not sure what else I can say to get my point across.
When you buy shares of JCTCF you are getting a fast growing business segment with a huge potential market that is currently stuck in a middle of a pile of garbage. My bet is that either that garbage will be swept away over the next few years (lumber prices return back to normal levels) revealing the great business segment within. Or the business will continue to grow so much that it will be noticed while still surrounded by garbage.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
There has been several headlines in 2007 that provide a glimpse that things are happening with non-wood products. For example, in January the company announced that it will sell its high-end dog kennels in 900 Petsmart stores. A few weeks later the company announced that they acquired patents and manufacturing rights to a vinyl gate system -- another non-wood product. In February, the company announced that Fred Myer will sell the high end dog kennels in 117 stores.
Here is another positive announcement related to non-wood products in March:
JCTCF “announced that the Company has received initial orders from two large national home centers for the Company's proprietary gate system for wood fences”
That’s a lot of positive headlines that have gone basically unnoticed as the stock is essentially flat year to date. Keep in mind that at the end of 2006 the P/E ratio was at only 12x-13x for a company with ROE north of 15% and almost zero leverage.
Headlines are one thing, but what do the numbers look like?
Here is where things get interesting. EPS for the last nine months (the fiscal ends in August) is $0.57 vs. normalized eps of $0.57 for the same period in fy2007 (the normalization removes a 16c gain in last years figures due to sale of a distribution facility).
So, what’s so great about investing in a company with zero earnings growth? Consider the fact that earnings are still flat while
1) this company sells wood products and the cost of lumber has plummeted. I don’t have exact statistics and JCTCF did not give any numbers in their latest filling but if you were to look at the latest filling from UFPI which I am a shareholder and have mentioned before you would see that lumber prices have fallen by at least 15% year-to-date.
2) its most profitable business segment last year (Greenwood) has experienced a 17% YoY sales decline and profits for that segment are down almost 50%
3) the company made no money in the “industrial tools” business which accounted for 4c of earnings last year at that time
When you consider that all these notable items have been completely offset by the more than doubling of profits in the JCLC segment and that all that increase was driven by non-wood products a different pictures start to emerge.
For the first nine months of the year, sales in JCLC are up only 2% while operating income for the unit is up 140% …..here is the single most important line from the 10Q
“this reflects a sizable increase in specialty metal products that slightly more than offset a sizable decrease in wood products sales. Operating income was up $889,886 [+140% YoY] reflecting the fact that the gross margin on specialty metal products is much higher than on wood products sales.”
I guess I am not sure what else I can say to get my point across.
When you buy shares of JCTCF you are getting a fast growing business segment with a huge potential market that is currently stuck in a middle of a pile of garbage. My bet is that either that garbage will be swept away over the next few years (lumber prices return back to normal levels) revealing the great business segment within. Or the business will continue to grow so much that it will be noticed while still surrounded by garbage.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Jul 13, 2007
JCTCF -- “Da Bears”
I generally try to summarize the bearish case with one sentences, in the case of JCTCF it can be summarized with one work – INCONSISTENCY.
For example, in the last fiscal quarter of 2006 (ending on August 2006) the company reported positive sales growth while YoY eps doubled. Furthermore, for the full fiscal year 2006 operating eps (which is actually lower than reported eps due to a one time gain) was up 115% on YoY basis. Based on the report the company looked like it was well on the way to driving margin improvement in its two biggest businesses and the turnaround was well under way.
However, the following quarter (fiscal 2007:Q1 and calendar November 2006) the company “crapped all over itself” to use a favorite moniker that our trading desk assigns to stocks that drop from $13 to $10 in one day. Revenue fell 15% YoY, operating net income which excludes the positive effect of $150K inventory write-down reversal fell by 56%.
Even worse, JCLC which holds the hidden asset of “non-wood” products and is in my mind the only reason to own this stock actually experienced a 26% decline in operating income and margins in that business unit actually fell. This kind of inconsistency really makes investors question why they should own a tiny, highly illiquid, microcap with management that rarely publicly talks to investors and provides no business updates. The revenue decline is bad enough, but that can be excused by the fact that most of the business is still based on commodity pricing but the decline in margins in JCLC was inexcusable.
In the following quarter, (fiscal 2007:Q2 and calendar February 2007) the company reported another strong quarter -- by my calculations the company registered 38% YoY operating income growth. However, the quarter was “mixed” as revenue fell again by double digit rates and cash flow was negative compared to positive the previous year at this point as inventory drastically increased.
The point is that while there certainly appears to be a turnaround going on at JCTCF and the company is heading in the right direction, the result have been inconsistent.
Also, it can be added to the bearish case that JCTCF still makes most of its revenue and income from commodity products. The revenue decline that has precipitated over the last few quarters—0%, -14%, -15% in the last three most recent quarters—is a perfect example of the danger that faces companies that sell a commodity product, of course JCTCF has been trying to change that.
While I am not spending much time on this – as it should be evident – an investment in JCTCF comes will all the dangers associated with highly illiquid, highly volatile, tiny winy microcaps.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
For example, in the last fiscal quarter of 2006 (ending on August 2006) the company reported positive sales growth while YoY eps doubled. Furthermore, for the full fiscal year 2006 operating eps (which is actually lower than reported eps due to a one time gain) was up 115% on YoY basis. Based on the report the company looked like it was well on the way to driving margin improvement in its two biggest businesses and the turnaround was well under way.
However, the following quarter (fiscal 2007:Q1 and calendar November 2006) the company “crapped all over itself” to use a favorite moniker that our trading desk assigns to stocks that drop from $13 to $10 in one day. Revenue fell 15% YoY, operating net income which excludes the positive effect of $150K inventory write-down reversal fell by 56%.
Even worse, JCLC which holds the hidden asset of “non-wood” products and is in my mind the only reason to own this stock actually experienced a 26% decline in operating income and margins in that business unit actually fell. This kind of inconsistency really makes investors question why they should own a tiny, highly illiquid, microcap with management that rarely publicly talks to investors and provides no business updates. The revenue decline is bad enough, but that can be excused by the fact that most of the business is still based on commodity pricing but the decline in margins in JCLC was inexcusable.
In the following quarter, (fiscal 2007:Q2 and calendar February 2007) the company reported another strong quarter -- by my calculations the company registered 38% YoY operating income growth. However, the quarter was “mixed” as revenue fell again by double digit rates and cash flow was negative compared to positive the previous year at this point as inventory drastically increased.
The point is that while there certainly appears to be a turnaround going on at JCTCF and the company is heading in the right direction, the result have been inconsistent.
Also, it can be added to the bearish case that JCTCF still makes most of its revenue and income from commodity products. The revenue decline that has precipitated over the last few quarters—0%, -14%, -15% in the last three most recent quarters—is a perfect example of the danger that faces companies that sell a commodity product, of course JCTCF has been trying to change that.
While I am not spending much time on this – as it should be evident – an investment in JCTCF comes will all the dangers associated with highly illiquid, highly volatile, tiny winy microcaps.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Jul 11, 2007
JCTCF -- Today's Earnings
Those of you that have not looked at JCTCF since I posted on the stock a few days ago should take a quick look at todays earnings announcement -- actually you are better off looking at the filed 10Q.
Based on simple YoY eps growth the company reported a very good quarter with "clean" EPS growth of 30%+. However, if you really dig into the 10Q and you know what to look for I think this was a blow out quarter.
If you remember, in my original post I classified JCTCF as a "hidden asset" type of investment. I also stated that the "Lumber, Building Materials & Other" (JCLC) segment which is made up of “wood” and “non-wood” products is really the key to this investment. The hidden asset being the "non-wood" products.
Here is the most important part of today's announcement:
" Sales at JCLC were $8,216,632 for the three months ended May 31, 2007, which was an increase of $1,514,124 or 18% compared to sales of $6,702,508 for the three months ended May 31, 2006. The increase primarily reflects a very significant increase in the sales of specialty metal products along with a moderate increase in wood products sales. Operating income was up $412,598 or 48% based on both the higher level of overall sales and particularly on the fact that the gross margin on the sale of the specialty metal products is much higher than on wood products sales."
While I am very happy to have some confirmation on my original thesis, one quarterly report does not change anything.
As I planned originally, my next post will concentrate on the bear case for the stock. I will than post the bullish case --again, the hidden asset within the company. I will also discuss the valuation and see how it has changed based on the new earnings and the price move over the next few days -- which looks like its going to be substantial.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Based on simple YoY eps growth the company reported a very good quarter with "clean" EPS growth of 30%+. However, if you really dig into the 10Q and you know what to look for I think this was a blow out quarter.
If you remember, in my original post I classified JCTCF as a "hidden asset" type of investment. I also stated that the "Lumber, Building Materials & Other" (JCLC) segment which is made up of “wood” and “non-wood” products is really the key to this investment. The hidden asset being the "non-wood" products.
Here is the most important part of today's announcement:
" Sales at JCLC were $8,216,632 for the three months ended May 31, 2007, which was an increase of $1,514,124 or 18% compared to sales of $6,702,508 for the three months ended May 31, 2006. The increase primarily reflects a very significant increase in the sales of specialty metal products along with a moderate increase in wood products sales. Operating income was up $412,598 or 48% based on both the higher level of overall sales and particularly on the fact that the gross margin on the sale of the specialty metal products is much higher than on wood products sales."
While I am very happy to have some confirmation on my original thesis, one quarterly report does not change anything.
As I planned originally, my next post will concentrate on the bear case for the stock. I will than post the bullish case --again, the hidden asset within the company. I will also discuss the valuation and see how it has changed based on the new earnings and the price move over the next few days -- which looks like its going to be substantial.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
Jul 9, 2007
JCTCF -- First Look
Initially attracted to this stock for the following reasons:
-substantial EBITDA and earnings growth but still low multiple
-recently strong ROE without much leverage
-very thinly traded (roughly 5K shares per day) and very large insider ownership
-extreme stock volatility over last 18 months despite steady earnings growth
Share Price…….$8.17
Market Value …..$20M
Enterprise Value: ….$24M
Investment Type: …..Hidden Assets
Jewett Cameron Trading Co. Ltd (JCTCF) has four business lines with Greenwood and JCLC accounting for 90% of 2006 sales.
Business Lines
Industrial Wood Products (aka Greenwood) essentially sells treated lumber and other wood products to OEMs in the transportation and recreational boating industry. In the latest 10K the company tries to make the case that these are “value added” products with a lot of customization but based on margins and the recent financial performance of this business and management’s comments this is still largely a commodity business. Also, not only is this business a commodity business a large part of the unit sales (34%, 41%, and 39% in 2006, 2005, and 2004 respectively) came from the recreational boating industry which is highly leveraged to the economy.
Lumber, Building Materials & Other (JCLC) is made up of “wood” and “non-wood” products. The wood products are all pure commodity products with the final users being the residential remodeling or DIY market. The products are sold either at the company’s distribution center and home improvement retailers/center. The “non-wood” products are sold primarily by home improvement retailers and include dog kennels, greenhouses, gates, etc. The company has been expanding the number of “non-wood” products in its lineup and has increased the number of stores that sell these products. I will talk at length about this segment of the JCTCF’s business in further posts as I believe it’s the key to the investment thesis.
Seed Processing and Sales (JCSC) is in the business of taking raw seeds and processing them into marketable products to be sold to farmers.
Industrial Tools and Clamps (MSI) imports and distributes pneumatic air tools and industrial clamps. MSI owns the brand names while the manufacturing is done in Asia. In the lastest 10K, the company estimates that the pneumatic air market at $1B in annual sales with many competitors. The industrial clamps market is estimated at $400M in annual sales with fewer competitors and where JCTCF feels they can take market share.
As always, in the following posts I will outline the Bear and Bull cases for the stock and conclude by deciding if this stock will be added to the Best Ideas or Watch List portfolio.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
-substantial EBITDA and earnings growth but still low multiple
-recently strong ROE without much leverage
-very thinly traded (roughly 5K shares per day) and very large insider ownership
-extreme stock volatility over last 18 months despite steady earnings growth
Share Price…….$8.17
Market Value …..$20M
Enterprise Value: ….$24M
Investment Type: …..Hidden Assets
Jewett Cameron Trading Co. Ltd (JCTCF) has four business lines with Greenwood and JCLC accounting for 90% of 2006 sales.
Business Lines
Industrial Wood Products (aka Greenwood) essentially sells treated lumber and other wood products to OEMs in the transportation and recreational boating industry. In the latest 10K the company tries to make the case that these are “value added” products with a lot of customization but based on margins and the recent financial performance of this business and management’s comments this is still largely a commodity business. Also, not only is this business a commodity business a large part of the unit sales (34%, 41%, and 39% in 2006, 2005, and 2004 respectively) came from the recreational boating industry which is highly leveraged to the economy.
Lumber, Building Materials & Other (JCLC) is made up of “wood” and “non-wood” products. The wood products are all pure commodity products with the final users being the residential remodeling or DIY market. The products are sold either at the company’s distribution center and home improvement retailers/center. The “non-wood” products are sold primarily by home improvement retailers and include dog kennels, greenhouses, gates, etc. The company has been expanding the number of “non-wood” products in its lineup and has increased the number of stores that sell these products. I will talk at length about this segment of the JCTCF’s business in further posts as I believe it’s the key to the investment thesis.
Seed Processing and Sales (JCSC) is in the business of taking raw seeds and processing them into marketable products to be sold to farmers.
Industrial Tools and Clamps (MSI) imports and distributes pneumatic air tools and industrial clamps. MSI owns the brand names while the manufacturing is done in Asia. In the lastest 10K, the company estimates that the pneumatic air market at $1B in annual sales with many competitors. The industrial clamps market is estimated at $400M in annual sales with fewer competitors and where JCTCF feels they can take market share.
As always, in the following posts I will outline the Bear and Bull cases for the stock and conclude by deciding if this stock will be added to the Best Ideas or Watch List portfolio.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
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