Thursday, November 22, 2012

Goodfellow Inc 2

I own this stock Goodfellow Inc. (TSX-GDL, OTC-GFELF). I had read a favorable report on this stock in 2009 and at one time the Investment Reporting was pushing this stock. I bought some stock in December 2010 and then some more in February 2011. I now have had this stock for 2 years and have lost 18.4% per year, including dividends or 19.8% per year excluding dividends.

The one thing to notice about this company is that insiders own over 60% of the outstanding shares. Insiders have some options, but everyone has a lot of shares a few options, comparatively. What the insider shows is that there has been no insider selling or insider buying over the past year. What it also shows is that the company is buying back shares on the open market for cancellation.

An interesting note Stephen Jarislowsky owns almost 13% of this company. Jarislowsky is a highly thought of Canadian Financier. You can see an entry on his on Wikipedia. He talked about being the “Warren Buffett” of Canada.

According Reuters there are 2 institutions that hold 12% of the outstanding shares. There has been no buys or sells within the last 3 months.

The 5 year low, median and high median Price/Earnings Ratios are 5.41, 11.20 and 18.37. The current P/E ratio is 11.00 based on 2013 earnings of $0.75 and stock price of $8.25. This ratio says that the stock price is reasonable. However, if you use the earnings for the financial year ending in August 2012 of $.51, the P/E is 16.18. This says that the stock price is relatively high, but reasonable.

With the increased in dividends for 2013, the company seems to be suggesting an EPS for 2013 of $.70 to $0.79. This level of earnings would give a current P/E of 11.79 to 10.44. This would suggest the stock price is relatively reasonable for this stock.

I get a Graham price of $15.17. The 10 year low, median, and high median Price/Graham Price Ratios are 0.49, 0.63 and 0.75. The current P/GP Ratio of 0.54 would suggest that the stock price is relatively reasonable. Also, companies are considered a good buy when the stock price is at or below the Graham Price.

I get a 10 year median Price/Book Value Ratio of 0.92. The current P/B Ratio at 0.61 shows that the stock price is relatively cheap as this current ratio is only 65% of the 10 year median P/B Ratio.

I get a 5 year median dividend yield of 5.38%. The current dividend yield is 3.64%. By this test the stock price is high as the current dividend yield is some 32% lower than the 5 year median dividend yield. The 10 year median dividend yield is 4.08% but this is still some 10% higher than the current dividend yield. It shows a possible better stock price, but not a great stock price. The problem with this test is that the dividends tend to fluctuate.

There is some disagreement with my tests as to how good the current stock price is. Generally you would go with the dividend yield test unless there are reasons not to. The dividend yield test shows that the stock price is rather high. This may not be a good indicator because dividends do fluctuate. The next one to go with is the P/B Ratio. This ratio shows that the stock price is cheap. If you split the difference, you get a reasonable stock price.

On a technical level, Bar Chart gives this stock a buy rating. (Some analysts feel you should do fundamental analysis to determine what to buy and do technical analysis to determine when to buy.)

I can find no analysts reporting on this stock. I plan to hold what I have. My expectations would be that over the long term this stock will return me 8 to 10% per year, including dividends. I have a small position in this stock and this will not change. I live off my dividends and this stock’s dividends do fluctuate.

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, Quebec, just outside Montreal. Its web site is here Goodfellow. 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 or StockTwits.

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