Celadon Group A RISK on Mexico and NAFTA

I was driving from Arkansas visiting my grandchildren and passed a truck with this name on the side. Well that was a new name to me. Then I began to notice several of them. My making money antenna registered it and I made a note to study the company. To my surprise that the company was fundamentally sound. So here is the study for your consideration. 


This is the public relations blurb on their web site. www.celadon.com


Celadon is one of the largest and most progressive transportation and logistics companies in North America. Founded in 1985, Celadon has grown continuously for over 28 years and now employs over 4,000 associates worldwide. We have the newest equipment operated by the most skilled drivers on the road; our expertise means reliability and dependability. As one of the top truckload carriers in North America, we have international resources strategically located within the United States, Canada, and Mexico. In addition to international business, Celadon also offers a range of truckload transportation services within the United States, including long-haul, regional, local and dedicated. Our facilities allow us to provide a total transportation solution. Celadon Logistics provides freight management services, less-than-truckload consolidation and freight brokerage services. Celadon Dedicated Services offers supply chain management solutions, such as warehousing and dedicated fleet services. You can count on us for solutions to all your transportation and logistics needs.

They acquired Tango Trucking in 2015, Teton Transportation in 2012, and FTL this year. They are a risk considering they receive most of their income from trips to and from Mexico or Canada because of NAFTA. 

How do they do they do with Better Investing standards?

1. Sales have grown 8% over the past 10 years and it is a small capitalization company.

2. Pretax profit on sales in 6% and just over the industry average of 5%. 

3. 12% earned on equity is under the industry average of 19%. This is a concern.

4. Historic earnings are 18% over the last 10 years. This is good.

5. The upside/downside ratio is really skewed at -13 to 1. It is really below the buy zone.

6. It pays a small dividend but less than half of the earnings per share.

7. It is in the low of the buy zone. 

This investment is a speculation. It is low. It is strong in the past. It is challenged to find drivers, adjust to the new environment created by the anti-Mexico rhetoric politically. A venture. 


We will buy 100 shares for our fantasy portfolio. 

WE paid $769.00 for 100 shares. 

CGI cost basis $769.00 value is $865.00 = +96.00 (01/08/2017)
STRC cost basis $7,719 value is $7,938.00 = +$219.00 
LULU cost basis $6,855.00 value is $6,827.00 = -$28.00
GNTX cost $1,856.00 current $2,052.00 .... +196.00
BNS paid $5,408.00 value $5,788.00 = +$380.00
TSCO paid $6,667 value $7,516.00. = + $849.00
KMX paid $5,444 value $6,540.00 = + $1096.00
LCI paid $3,238 value $2,225 = - $1,013.00
JLL paid $9,699 value $10,673.00 = + $974.00

Stericycle a disposal services company.

www.stericycle.com

Stericycle is a compliance company that specializes in collecting and disposing regulated substances, such as medical waste and sharps, pharmaceuticals, hazardous waste, and providing services for recalled and expired goods. 

It meets all the criteria of the Better Investing method of stock picking. 


1. It has 15% growth in sales over the last five years and is a Mid Cap company (one between 1 and 10 million in sales). It had 2 million in sales last year.

2. Pre-tax profit on these sales is just under 20% and compares to the industry at just under 10%.

3. Earned on equity is just above 16% compared to the industry five year average of just above 5%.

4. Historic earnings per share was 13.5% over the past five years.

5. It is a growth company and does not pay a dividend.

6. It is 14 to 1 upside/downside ratio.

7. It is in the BUY zone which is  $73 - $94.

Some cautions:

1. It had a disappointing year in 2015 however 2016 is on target and they have predicted strong growth in 2017.

2. It went from 1 million in debt in 2014 to 3 million in 2015. This is due to acquisitions.

3. "Evolving environmental rules and regulations remain another headwind that alter its current method of doing business and ultimately increase costs and compress margins further. The recent spate of acquisitions is leading to higher overheads and integration-related expenses, which are weighing on margins.” Zacks evaluation of this company as of December 16, 2016.

We will buy 100 shares today at $77.12 so we will have $7,712 shares and paid $7,719. 

STRC cost basis $7,719 value is $7,938.00 = +$219.00 (01/08/2017)
LULU cost basis $6,855.00 value is $6,827.00 = -$28.00
GNTX cost $1,856.00 current $2,052.00 .... +196.00
BNS paid $5,408.00 value $5,788.00 = +$380.00
TSCO paid $6,667 value $7,516.00. = + $849.00
KMX paid $5,444 value $6,540.00 = + $1096.00
LCI paid $3,238 value $2,225 = - $1,013.00
JLL paid $9,699 value $10,673.00 = + $974.00

Contrarian in Real Estate

A review of John D. Spooner's book provides market insight from this former executive at Salomon Smith Barney. He is a Harvard graduate and lives in Boston.

"Sometimes it is good to buy into America's most hated companies" is one of his chapter titles. He describes his contrarian view. Out of favor good companies when down provides great buying opportunities.

I can illustrate this in my wife's retirement plan at Fidelity. When the housing market tanked we started putting her new money into a real estate mutual fund they offered. It grew 30.51% the first and 5% last year and 3.38% this year. Not bad. A great average being a contrarian. No one wanted in the housing market at that time but it rewarded timeliness and well as time in the market.

Real estate investments are sometimes called REITS or Real Estate Investment Trusts. They usually pay exceptional dividends but grow slowly. Our investment club would not buy REITS because we are looking for growth companies. REITS usually own businesses, apartment complexes, shopping centers, industrial properties and sports complexes.

Why Invest in Stocks

Why do I do what I do? I started in 1998 buying stock in what one of my buddies suggested. I did not do very well and would have quit but I began to go to meetings where I worked. They had an investment committee and met many investment leaders from some very good investment firms in California, New York, St. Louis and Oklahoma City just to name a few. I studied and listened and read the slick books they presented. I was a sponge.

In 1998 I was the interim pastor of a great church in central Oklahoma and three men in that church heard of my interest in investing. So they asked me to fill an empty spot on the Central Oklahoma Investment Club of Chickasha, they limit it to 15 members. I attended and then joined the club. My caveat was that I wanted to invest to a certain limit but wanted to use the club as a vehicle for making charitable gifts. They understood and I got involved. I did not want to just pile up money but to invest for ministry. The remainder in the club I plan to use to fund increase a DAF (donor advised fund) that my children can use to fund ministry after my death. I plan to set up the DAF in the near future with appreciated assets from a personal account.

Since that time, I have reached the limit and went beyond four times. The earnings in stock appreciation the club transferred at my request to The Baptist Foundation of Oklahoma to make gifts to Falls Creek for the Sake of the Call, a youth camp in southern Oklahoma, to Church Renewal International for mission ministries in India and the Philippines and gifts to the building fund of Snow Hill Baptist Church in Tuttle, Oklahoma, the endowment at South Lindsay Baptist Church in Oklahoma City and to an endowment fund at First Baptist Church in Minco, Oklahoma. Those gifts I perceive as coming 1. from God 2. but using the knowledge learned at the Investment club and 3. willing to take risks. God does not promise to make investments grow and will not protect the portfolio from going down just because one plans to give to ministry. However, I believe with proper study, trusting the combined wisdom of investment partners and making routine small deposits, usually $100 per month to the pool that I have found my vehicle for giving beyond the tithe for the last 20 years.

I grew up in South Oklahoma City. Spent most of my time on 29th street on car row and worked at a grocery store on the south side for 9 years. I did not know anyone who did stocks much less think I would ever be doing anything like this. No one in my family ever did this and many of them see it as gambling. That is possible. I call it taking measured risks based on information. I have lost at times but usually when I have departed from the discipline I know through Better Investing, the tool of investment clubs nation wide.

This can become an obsession so I try to temper it with lots of engagement with people as a volunteer now that I am retired. That balance makes me a person with a mission statement but allows  me to slow down to meet my age energy level. I also cook for my wife who is still working and try to be a good house husband. That is my number one mission. She is awesome.

So my vehicle is found here: www.betterinvesting.org. You can use this tool as well. That is the basis of these blog studies. Nothing new under the sun.

A LULU to buy!

Lululemon athletica inc., an athletic apparel company, together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. It operates through two segments, Company-Operated Stores and Direct To Consumer. 

As of January 31, 2016, it operated 363 company-operated stores under the lululemon athletica and ivivva athletica brand names in the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany, and Puerto Rico. lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada. (From Yahoo Finance)

www.lululemon.com


This company has an outstanding financial record and is a way to have some international exposure, since it is a Canadian company, in your portfolio. It is a consumer discretionary company and has cyclical ramifications.

Our investment club would buy this madcap company if we need one this size and in this sector. Diversification means that we are careful not to have too many stocks in any one sector, or any one size, or any one industry. We try to have 15 stocks with 25% small cap (under 1 billion in sales), 37% mid cap (between 1 and 10 billion in sales) and 37% large cap (over 10 billion in sales). The rest is cash.

Here are the numbers on this company.

1. It has grown over the last 10 years at a rate of 33.7%. Not bad. It had sales last year of 2 billion.
2. Pretax profit on sales was 24%. Excellent with the industry average of 10.30%. Some in the industry are Children's Place, Express, Under Armor.
3. Earned on shareholders equity was 27.57% over 5 years. That is just under Express with 30.82% but over the industry average of 24.88%. At this point in our study we would make a note of Express to do a future study.
4. Earnings per share is 43.4% moving at more than sales but not too much more in my opinion.
5. It pays no dividend and earnings are put back into opening more stores or enhancing products. That is good. WE are seeking growth not income.
6. It has a 4.7 to 1 potential to grow. That is what we call the upside downside ratio.
7. The stock went down today and is in the middle of the buy zone. I actually bought some earlier and it went down another $1. My track record at times. Sometimes that happens. It is not short term we seek. That zone we determine to be 41.6 to 81.7.

Any negatives?

1. They stay with current products alone and not develop new products.
2. It is a trend company and the trends could change in fashion.
3. Canadian companies have an international tax that creates filing headaches for your accountant or for you if you do your own taxes. This is an ADR so it trades on the New York Stock Exchange as an American Depository Receipt (ADR).
4. The UK exposure is subject to the downturn if it occurs with Brexit.

Well we are buying 100 shares today for our fantasy portfolio. So here is what we did and where we are:


100 shares of LULU cost basis $6,855.00 value is $6,848.00. (reflects the $7 commission)
GNTX cost $1,856.00 current $2,027.00 .... +171.00
BNS paid $5,408.00 value $5,870.00 = +$462.00
TSCO paid $6,667 value $7,672.00. = + $1,005.00
KMX paid $5,444 value $6,193.00 = + $749.00
LCI paid $3,238 value $2,495 = - $743.00
JLL paid $9,699 value $10,313.00 = + $614.00

Well LCI is doing much better. We were down over $1,200 at one point. Looks like our gain at this point is 5.75% or $2,251.00 growth since September. We are experiencing unprecedented growth in the markets in this political climate. Enjoy. It comes down also. Put on your seat belts.

Trump Market

Barrow thinks the Trump election has caused investors to go with gut instinct. What Keynes called "animal spirits."

"Steve Barrow, currency and fixed-income analyst at Standard Bank, said in a Wednesday research note “whatever fears might exist in some quarters about Trump’s win, some sort of animal spirits might have been spurred.” So-called animal spirits is an oft-used term on Wall Street coined by famed economist John Maynard Keynes to describe gut instinct. Or as Keynes explained, “a spontaneous urge to action rather than inaction,” in his book The General Theory of Employment, Interest, and Money."



Why do the markets like a Trump presidency?

1. No uncertainty. Election is over.
2. Tax reform.
3. Real job growth.
4. Infrastructure spending.
5. Pro growth, pro markets people in his administration. 

Concern of the markets?

1. Will he keep his promises or waffle on some?
2. Will he create a counterproductive trade war?

3. Inflation leading to higher interest rates.
4. Infrastructure spending. He could spend too much.

"Now, with the GOP controlling the House as well as the Senate, traders see real economic growth on the horizon, not just a Fed-induced stock-market bubble where interest rates are so low, there’s no other place to put your money."

"What, specifically, does the market like about Trump’s plans? His promise to cut both corporate taxes and red tape will translate into higher corporate profits so businesses can expand and create jobs. Real unemployment can finally decline not because people are dropping out of the workforce but because they’re actually working again."

Charles Gasparino is a Fox Business Network senior correspondent.


Our portfolio is doing well today. I wish I could do this well on a regular account. We are up to a gain of 3.64% over three months. That's a great quarter. Tractor supply is lights out good with a 14.31% gain. We have a paper gain of $1,204.50 in the overall portfolio even with a paper loss of $838.00 so far on Lannett (LCI) which we watch carefully.