TPS Position Update – December 2, 2015
. . . . Bluelinx Holdings Inc. (NYSE: $BXC) – Hold
Why isn’t the Bluelinx stock doing better?
When Q3 2015 financial results were reported a few weeks ago, we were delighted to see that the building products distributor made money. Q3 net income came in at $0.6 million. In 2014, the company reported a quarterly loss of $0.8 million.
Also good to see: selling, general, and administrative expenses were down by $6.2 million, an 11.1% reduction from Q3 2014.
But the stock is going nowhere. We recommended Bluelinx in August 2014 at $1.15, and it went up to $1.39. As recently as April 24th, it traded at $1.22. Now it’s at $0.62.
We have two thoughts on the stock price. First, we believe the company is underperforming. Revenues should be even higher given the strength of the rebound in construction. It would appear the market agrees.
Second, we may be searching for a simple reason why that doesn’t exist. Earlier this fall, Bluelinx CEO Mitchell Lewis said, “We do not generally comment on fluctuations in the company’s stock price. However, we are making an exception in this case. We are not aware of any fundamental business reason for the recent volatility in the price of BlueLinx stock.”
We’ll hold on for now. There are positive signs of modest revenue growth and expense reduction.
. . . . Fuel Cell Energy Inc. (NASD: $FCEL) – Sell
There’s been a lot of opportunity, but over the past year, there hasn’t been a lot of performance.
We recommended Fuel Cell Energy at $1.31 and the stock shot up to $4.74, rewarding our subscribers with a 262% return. Today, FCEL trades at $0.87.
The party seems to be over. It’s time to move on.
What disturbs us is the company’s lack of fundamental financial strength. The last straw: an announcement that management is sinking deeper into an “off the balance sheet deal” with the state of Connecticut.
The state is giving Fuel Cell Energy even more money to protect manufacturing jobs and expand its plant in Danbury.
We’re all for taking advantage of government money. But if the future of Fuel Cell Energy was as bright as the state of Connecticut believes, why aren’t private investors stepping up to the plate? Why isn’t the stock price surging higher?
We’re skeptical, so it’s time to leave. The company keeps losing money quarter after quarter. Q3 losses were $7,339.
A modest loss, yes. But there hasn’t been significant growth in revenue.
It’s time to sell the stock and pursue more promising opportunities.
Action To Take
- Hold Bluelinx Holdings Inc. (NYSE: $BXC)
- Sell Fuel Cell Energy Inc. (NASD: $FCEL)
Category: TPS Update
