Aecon Group Inc (ARE.TO)

Lots of good things. Oaktree partnership to develop US utilities business. Exposure to nuclear. All the pain will lead to better contracting. Real line of sight to doing well. Infrastructure need and spending will benefit them.

Plagued with cost overruns, so paying penalties impacts profitability. WSP is her choice in the sector.

Does not own shares. Scores 10/10 fundamentally. Has participated in upside rally since October. Strong business model which will benefit from infrastructure spending. Safe dividend yield around 6%. Good long term stock. Would recommend holding. 

Plagued with cost overruns on fixed-price contracts. She's not tempted. Sell, take the loss, and move elsewhere in the engineering space. She owns WSP, purely engineering design and services, no construction exposure.

Problems in fixed-price legacy projects, including cost overruns that are dramatically affecting profitability. This type of business inflexibility is not positive.

Last August, they had some writedowns based on fixed-price contracts in various places. The shares came off. They sold their stake in the Bermuda Airport at a great price, and sold a road-building division. Also good is that they may build a full-scale nuclear reactor in Ontario; they have nuclear expertise. Pays a 6% dividend. A quality company with little risk.

Finally some good news for them--sold 49.9% stake in the Bermuda airport (finally), and they just sold their Ontario road construction business. Are in much stronger financial position. Four legacy contracts at a fixed price will run out end-2023/early-2024. After that will be strong margin expansion. Pays around a 6% dividend and trades at a good PE vs. peers.

They had fixed-cost contracts with cost overruns and shares fell last year. Turned around this year, though, by selling stake in a Bermuda airport and road-building business. Demand for their work continues to grow. Likes this long-term. Yields 5.6%. Good long-term. Those fixed-cost contracts will recover in time.

The engineering and construction sector has really been impacted by cost inflation. Lots of problems with fixed-price contracts, will take time to go through the system, and so the repricing cycle is longer. Be cautious. Layer in, don't weight over 5%. You don't want to be all in if sentiment is going to tick down.

(A Top Pick Feb 01/22, Down 35%)

Still mired in cost overruns that's lasting longer than he expected. That said, roads still need to be built and ARE will benefit. Valuation has been punished. Look at Stantec instead in this space, but he is holding onto ARE. He expects a recovery.

Cost overruns on projects entered into a decade ago, a much different economic environment. Nuclear expertise. Would benefit from increased mining development. At steal at these levels. Nice total return for 5-10 years. Yield is 7%, shouldn't have to cut.

Am engineering construction company, so margins are lower than WSP's or Stantec's.  Have suffered cost overruns and project lays, like many in their sector. They have a backlog, but you don't know the quality of if it. Are better opportunities elsewhere. Doesn't like the sector.