Monday, June 30, 2008

SNC-Lavalin Update

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

I bought this stock (TSX-SNC) in December 1998 and first talked about it on May 24, 2008. It has been a great stock for me, but since it is over 5% of my portfolio and I have concerns about it, today I decided to sell a third of the stock I own. I know that a lot of people still have a buy rating on this stock, but I still find the ratio of book value to price a concern. At the end of 2007, the stock price/book value ratio was almost 8. That is the stock was trading at 8 times book value. This has not changed.

By selling of part of my stock, I lock in the value I have earned on it and lower my exposure.

When I bought this stock, it was more a value type stock than today. At that time, the yield was just over 2%, and now the yield is under 1%. In 1998, the stock was trading at 1.4 times book value, a long distance from the over 8 times book value of today. When I bought this stock, the P/E was at 10, which is also a long way from the 35 it is today. This stock used to have the characteristics of both a value stock and a growth stock, but it seems to have only growth stock characteristics today.

So, even though I have done well by this stock, I think this it is wise to sell some of it.

See my spreadsheet at See my website at

This company is involved with engineering and construction work around the world, this includes infrastructure and buildings; infrastructure and construction; power (nuclear, thermal, hydro etc); chemicals and petroleum; environmental projects; and mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is

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