Badger Daylighting (BDGI.TO)

This has had a nice move off of $20, and we are very close to the highs for the year. This is a company that can do well going forward. Spending on infrastructure and construction could be stronger over the next couple of years. He would have no problem owning this.

This has had a great recovery and has done very well in a tough environment. They have moved a lot of their hydro-vac’s into the US, and doesn’t think the market has given them credit for doing as well as they did. Have slowed down their production of new hydro-vac’s this year. He would like to see greater clarity.

(Top Pick Aug 26/15, Up 51.63%) They had a lot of exposure to the US, but had such a great business model. They have mobile assets. They have great cash flow. They will continue to grow in the US and may increase their dividend in the future.

They use high-pressure water to move earth. Some of their customers are energy companies and some of their business is with municipalities in utilities. Utilities don’t want cables to be damaged, so water is used. They are now the biggest in their industry in North America. They are rapidly growing their business in the US. Dividend yield of 1.44%.

(Market Call Minute.) They just put up a great quarter. It has been hit and miss in the last few quarters. He is looking at this pretty deeply right now.

Basically half its revenues were tied to the oil/gas industry, so they fell on hard times. They’ve rejigged the profile, because the other part is on utilities, and mostly with construction in streets being dug up to lay down pipe to run cable and stuff. As long as the oil/gas sector doesn’t get any worse, they’ll start to generate more cash, so this is kind of a derivative way to play the oil/gas industry. Dividend yield of 1.49%.

This used to be a really exciting growth stock. Builds hydro-vac units used for excavation which were used a lot in the energy industry. It was a great growth stock when energy services was working. Now the outlook is less clear. Their equipment is fairly mobile and they have done a great job in moving into the US. They now do utility work for more than half their portfolio. The medium and short term outlook is less clear because we are not sure of the strategic direction of the new CEO.

The previous management was terrific in diversifying out of the oil/gas business. It is now growing much more in the US. This could still face a couple of tough quarters, but she would hang onto it. 2 years from now you will be happy.

By far the biggest North American players in hydro-vaccuing with over 1000 trucks that excavate without breaking pipes and wires. Stock was hit because of their exposure to the oil/gas industry, especially in Western Canada. However, two thirds of sales are now coming out of the US. They are growing their utility infrastructure business. Thinks there will be a big turnaround in 2017. They make great profit margins and great free cash flow. Very well-managed. Not expensive, trading at under 8X next year’s EBITDA. Dividend yield of 1.76%.

They do daylighting, exposing underground wiring and pipelines. Seem to be able to do it quicker and more efficiently than their competitors. Great management team. Have been through downturns before and have managed it. However, looking at the valuation, it looks like it is priced to perfection at 24X forward earnings. Has a pretty good growth plan, and if they can deliver on it there is some potential for a return. The problem is, they moved into the US and have seen their margins depressed. Not confident they can get those margins up to historical levels.

(A Top Pick May 26/15. Down 24.58%.) This is in the hydro-vac business. They build machines that uses high-pressure water to move earth. Half their business is to the energy industry, and the other half is utilities and governments. This is the biggest in North America and a consolidator. Still a Buy. Thinks we have seen the most of the downside for this.

They have been diversifying away from the energy patch. They also diversified into the US. They are the biggest in both countries. The core business continues to do okay. He still buys it for new accounts.

They were focused on oil and gas, but now it is down to about 50% due to reallocating. They are well managed and are definitely doing the right thing through this downturn. Portfolio managers might look at this one to get more exposure indirectly to oil and gas.

(A Top Pick May 25/15. Down 25.48%.) Hydro-vac excavators. Was a little early on this. Reduced his holdings because of the declining price momentum. Valuation is still good, and it trades in the top 95% of his valuations. ROE is around 20%. Very solid balance sheet. This will benefit from a cyclical turn in the oil sector.

The issue they had this year was that when oil/gas exploration fell off so dramatically. A lot of their investors were in for the dividend yield, and it started to look like it would be dicey if they could keep the dividend where it was. Had been Short the name because he had thought the perception of the company was that it was safe because of their other business lines outside of oil and gas. Has covered his Shorts recently. If you think the energy rally is real, then he would take a look at it here. A solid management team. Valuation has come down to a level where it is reasonably attractive.