Russel Metals (RUS.TO)

Likes the TSX this year and is thinking it is going to be a good year in 2016. Metals are going to have to be the driving force. The stock is trending a little bit lower and looking for support. Overall this has been acting quite well. Technically it is not something you have to own today. If you own it, he doesn’t see any downside pressure.

Had a negative transit last week and broke below $16.71, which is his Sell signal. The yield is 9.70%. This year it is only going to earn $0.97 and next year $1.32. It is not even covering its dividend. Thinks the dividend will be cut.

(Market Call Minute.) A steel fabrication shop, primarily servicing the oil industry, so this is a no-brainer.

Getting closer to a Buy. He keeps looking at their bonds which are giving about 6%-6.5%. Owning this grade of bonds is very interesting. However, there is no liquidity in the corporate bond market, so if there is some disturbance in the bond market, you will get higher gyrations because there is no liquidity, no bank participation, and fewer people that have the ability to buy these. The neat thing about this company is that it has much more of a throughput business. The 8% dividend yield is probably coming down.

A great amount of their product goes into oil companies, as well as agriculture. He is concerned about the dividend at 8.4%.

Has been under a fair bit of pressure. Its valuation is not yet cheap enough to make it a real compelling Buy. Trading at around 9.5X EBITDA. Price to cash flow is not bad at 7X, but pretty low ROE. Even the recent beat on earnings didn’t do much for the stock. High yield of 8% and there is concern on the stability of that.

There are weak metal prices, weak margins in metals and weakness in the energy segment right now. Good long-term value, but no catalyst to get this year’s price higher right now. The dividend is not a safe as you think. He doesn’t know if they are going to have sufficient free cash flow in 2015-2016 to cover their dividend. A riskier name.

Earnings came out and were a little disappointing, but we are at that point of the cycle where earnings are expected to be disappointing. A pretty darn efficient management in terms of using shareholder capital and running their business well. They feel they can keep the 8% dividend yield.

Was hit during the energy downturn. It is a pretty stable business and they are a stable operator. Dividend is well covered through 2016. They cut it in 2008. This is a cyclical company. You are looking for the company to grow over time. He thinks the total return prospects are pretty good from here.

Dividend yield of 8%. Generally when yields move to 8%, and if they have been pretty nicely established at 2.5%-3.5% for the duration and there is a vulnerability as to when they will cut or if they will, it is a great opportunity. The chart going, back to 2006, is not really negative. It is just simply in a Bear market. This is a very good company and one-of-a-kind in the Canadian market. Doesn’t think the conditions on this are hugely negative.

Feels like this company gets caught up in steel prices and China. This is really a throughput business, a really neat company. They warehouse and distribute steel in mid-tier US cities. As long as steel is selling, they make their margins. It should be consistent over long periods of time. He hasn’t figured out the right price to get this at, but it is pretty close.

About a 3^rd in the US and 2/3 Canada. Pays a good dividend. Dropped 8% today. At this level, he might even look at this. It is a cyclical, but they have managed well. Good balance sheet. Now that it is under $20, he is going to have a look at it.

An industrial company and its period of seasonal strength is from the middle of October right through until May each year. Technically it broke support recently. Underperforming the market and trading below its 20 day moving average. Short-term momentum indicators are all negative right now. Watch for technical indicators to go positive around the middle of October.

Outlook for steel is fairly sloppy, and some of it is oil patch steel. He believes the dividend is definitely safe for now, at least into 2016. Even if they cut, they are very disciplined. Has good confidence in management. Dividend yield of 6.9%.

Good company and well-managed. It gives a good diversification. However, 30% of their end market is energy related, which is why it has been a little soft. This is an interesting stock at this price.