Monday, December 5, 2011

Goodfellow Inc. 2

I own this stock (TSX-GDL). I bought some at the end of 2010 and more in February 2011. I have not held this stock very long and I have lost some 34% of the value of my shares. I do believe I will do much better in the long term.

When I look at insider trading I find some selling ($.44M) by one of the Goodfellow family members. Insiders went from owning just over 60% of the company to owning 59.4% of this. Not much of a change. Also, there are two institutional owners that own some 12% of this company. Over the past 3 months they have neither sold nor bought any stock.

The 5 year low median Price/Earnings Ratio is just 5.81 and the 5 year high median P/E Ratio is 14.21. The current P/E Ratio at 8.16 is below the 5 year median P/E. However, it is a bit higher than the 10 year median P/E Ratio. This stock has generally had quite low P/E Ratios.

I get a Graham Price of $17.42 and the current stock price of $8.16 is some 53% lower. The median difference between the Graham Price and stock price is the stock price at 45.4% lower. So the current price is better than median. However, both the P/E and Graham Price are based on earnings estimates and these can be unreliable.

When looking at the book value, a couple of things are notable. First of all the Price/Book Value Ratio is just 0.60%. That means that the stock price is lower than the book value and this usually shows a good stock price. However, the 10 year median P/B Ratio is just 0.90, so generally speaking the stock price has been lower than the stock price.

The last thing to look at is the dividend yield. The current yield is just 2.45%. The stock has a 5 year median of 5.38%. The main reason for this is that they have been lowering the dividends since 2011 because of lack of earnings. They are being prudent. I do not think this stock will improve until dividends start moving up again. The company will probably not do this until they are sure of better earnings.

Why this stock has been so generally cheap probably has to do with it being a small cap with insiders owning a substantial portion of the stock. I could find no analyst following this stock.

The following report is a little old, being written in 2009. However, it is hard to find much on this company. See Jonathon Goldberg. There is another article dated in 2009 on this stock. This is one from The Canadian Benjamin Grahamblogger. People seemed to have lost interest in this stock as it hasn’t done much recently. I would think the recession will have to go before this will come back.

There is also mention of this stock in a Globe and Mail Number Cruncher article. See the Safe and cheap: Graham would have approved article. I should say something about number cruncher type articles. They might point out good stocks, but you really need to research companies beyond what these filters show. Sometimes, numbers can be deceiving.

I am certainly holding on to the shares I have bought, but mind you, I have not invested much in this company. I think that it will take a while to recover. The problem is no one knows when the current recession will be over. It is a balance sheet recession and therefore, historically, will take some time.

One thing this stock has going for it is, one of the insider owner is Stephen Arnold Jarislowsky. This man is a legendary investor. See Wikipedia entry.

Goodfellow Inc. is one of eastern Canada's largest independent re-manufacturers and distributors of lumber and hardwood flooring products. The company serves customers throughout Canada, the United States and abroad including the UK and China and the Middle East. H.Q is Delson, Qu├ębec, just outside Montreal.
It is about 60% owned by insiders. Its web site is here Goodfellow Inc.. See my spreadsheet at gdl.htm.

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. See my website for stocks followed and investment notes. Follow me on twitter.

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