TPS Position Update – August 25, 2015
***A Special Message***
Given the market’s recent gyrations, we thought some perspective from one of the most successful investors of the 20th century would be appropriate.
Benjamin Graham was Warren Buffet’s mentor, and Buffet’s first boss.
Graham wrote…
The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations.
The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.
Here at The Penny Speculator, we value your support, and take this opportunity to remind you that our commitment to helping you identify the most profitable opportunities remains strong.
. . . . BLUELINX HOLDINGS INC. (NYSE: $BXC) – Hold
Bluelinx is the kind of a stock that puts your patience to the test. Every rational bone in your body knows you don’t sell low and buy high. And while selling Bluelinx right now might release some stress, we’re going to hang on.
We recommended Bluelinx this time last year at $1.15. It’s been on an agonizingly slow slide ever since.
The most recent quarter was down, and that was frustrating.
Net income slid to $2.9 million in fiscal Q2 2015 from $3.2 million for the corresponding quarter in 2014.
Here’s a company that’s in the building supplies business. In fact, it’s one of the country’s leading distributors, and it’s not capitalizing on the uptick in new home construction nearly the way it should.
In June, housing starts jumped 26.6% and building permits were up 30% year-over-year.
Bluelinx CEO Mitch Lewis hasn’t provided any good explanations, other than to say, “We saw improvement in June following a particularly wet April and May, and we strive to keep that momentum going for the remainder of the year.”
Let’s hope so. And for now, let’s hang on.
. . . . FLEXIBLE SOLUTIONS (NASD: $FSI) – Hold
When we updated you on Flexible Solutions earlier this summer, we told you…
“…revenue, income, and cash flow are all growing. There are no storm clouds moving in to suggest they will stop growing.”
The storm clouds hit when Q2 results were reported last month.
One reason why: the firm may have “frontloaded” business from Q2 to strengthen Q1, and Q2 revenue didn’t come in strong enough to offset the reporting of revenue.
As CEO Dan O’Brien explains, “This quarter had somewhat lower revenue than expected, possibly because the excellent first quarter pulled sales from Q2.”
Bottom line… we are still believers in Flexible Solutions. One disappointing quarter doesn’t alarm us. The market has been brutal, punishing the stock irrationally.
FSI traded at $2.57 on June 17th. Today it’s at $1.02.
Action To Take
- Hold BLUELINX HOLDINGS INC. (NYSE: $BXE)
- Hold FLEXIBLE SOLUTIONS (NASD: $FSI)
Category: TPS Update
