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Opinions Michael Smedley
Algoma Central Corp.ALC.TOTOP PICKAug 21, 2014
Michael SmedleyStock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Premium contentOur PAST TOP PICK with ALC has triggered its stop at $14.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 5%, when combined with the previous recommendations.
Premium contentWe reiterate this marine bulk transport business as a TOP PICK. Recently reported revenues were up 10% over the year. Management expects a return to full fleet utilization for the balance of the year. It trades at 7x earnings and under book value, while supporting a 15% ROE. It pays a good dividend, backed by a payout ratio under 30% of cash flow. We recommend trailing up the stop (from $13.50) to $14.50, looking to achieve $22.00 -- upside potential over 40%. Yield 4.5%
(Analysts’ price target is $22.50)Premium contentFormerly known as Algoma Central Railway, this Ontario based bulk shipping company is a TOP PICK. The company recently announced the order of two additional refined product tankers to be contracted to Irving Oil. Cash reserves are growing, while the company reduces debt and buys back shares. It trades under book value and 8x earnings, while supporting an 18% ROE. It pays a nice dividend, backed by a payout ratio under 25% of cash flow. We recommend placing a stop-loss at $13.50, looking to achieve $22.50 -- upside potential of 45%. Yield 4.5%
(Analysts’ price target is $22.75)
Norman LevineIt is a shipper. It is a tough business. You often end up with empty ships doing a ‘dry’ run. This one has been rather consistent, but their return on capital is usually 5%, and is down to 2% right now. A year ago it was down to 1%. He likes improving return on capital. If it gets back to 5%, the stock would be worth about $20. We need to see that improvement. There is a small amount of evidence that the return on capital is improving.
A very well-run company. It ships goods across the Great Lakes and owns assets in ocean shipping. This is now trading below BV. A cyclical business. It could easily recover if the Canadian economy starts to improve. If you are looking for value, he wouldn’t hesitate to Buy. The company is doing all the right things. They are keeping their costs under control and using their balance sheet to improve their ships.
Barry Schwartz(A Top Pick Dec 1/14. Down 5.23%.) A small company that runs shipping vessels in the Great Lakes and also owns a share in an ocean shipping Company. The big news on this is that they have announced they are looking to sell their real estate, and he thinks there is an embedded value of $5 a share, and doesn’t think this is reflected in the stock price. He can see upside well into the $20-$25 range.
Barry Schwartz
(A Top Pick Aug 21/14. Down 2.57%.) The great shipping line on the Great Lakes. A very sensible long-term Hold. Pays a small dividend. If you own, continue to Hold.
Michael Smedley(A Top Pick Aug 21/14. Up 11.09%.) This is a great fleet of commercial ships on the Great Lakes. Clearly one of those good stocks in safe waters in the current market. Pays a dividend. A good safe haven.
Michael SmedleyInfrastructure is very important and these are long life assets. Shipping is never going to go away and they have ordered a bunch of new ships. Just reported their 4th quarter. Thinks normalized earnings for 2014 were about $1.20 a share and he is looking for $1.30-$1.40 a share in 2015. This is dirt cheap.
Barry SchwartzThey will have spent $500 million by 2016 replacing their ship vessels and are going to have one of the youngest fleets in the world. This company is going to have better ships, more fuel efficient and will be able to load faster. He sees earnings, probably by the end of next year, getting up to a normalized $1.50 a share. You are only paying 10-11 times earnings. Also, have other assets that they can unlock, including about $100 million of real estate. Yield of 1.74%.
Barry SchwartzMoves ships across the Great Lakes. The problem is, it is so cold it is going to be a late start to the season. Didn’t have a good 2013. Management was disappointed in how things went. Lousy start to 2014. Ships should be moving stuff already but they can’t. Assets are terrific. They are improving all the ships. Moving all the right products, grain, iron ore, salt, etc. A wonderful business that you can’t duplicate. Continues to buy this for new clients. Waiting for a bad quarter, and if that happens he will be buying a lot more. Yield of 1.8%.
Barry Schwartz
Greatest tanker fleet and in shipping of all the commodities. A good dividend. It has downtime in the winter. They might get to a higher level shortly due to a partial fleet modernization.