TPS Position Update – June 2, 2015

| June 2, 2015

TPS Position Update

. . . . Goldfield (AMEX: GV) – Hold 

We’re sticking with GV, but we’re still stung from what happened in late March.  On March 31, Goldfield opened at $1.70, after a close of $2.59 the day before.

What happened, and why are we still onboard with GV?

Goldfield builds and maintains electrical transmission lines for utility companies.

The company was dealt a bad hand with some nasty weather.  Flooding in Texas turned into a big problem, and triggered construction delays on four projects.

These delays, and an accident, forced the company to take a $3.9 million first quarter loss.

It can’t rain in the Lone Star state forever, and Goldfield’s projects in other states are doing fine.

Clearly, you never like to see a quarterly loss like this.  But revenues aren’t a problem at Goldfield.  They were up 39% in Q1.  

Something else that’s keeping us onboard with GV is the soaring backlog of future projects.  This backlog is growing.  It stood at $249.6 million at the end of Q1 2015, way up from $73.1 million at the end of Q1 2014.

Goldfield is a survivor.  The company has been around for more than a hundred years.  We expect revenue growth to continue and the troubles in Texas to calm down.

. . . . Bluelinx Holdings Inc. (NYSE: BXC) – Hold 

Here’s another company that’s been hurt by bad weather.

Bluelinx is a building supplies distributor that sells products like roofing, insulation, siding, and trim.

When the weather’s bad and new home construction slows down, so does business at Bluelinx.

But there’s more than better weather ahead to give Bluelinx some wind in its sails.

New housing starts are now the strongest they’ve been in more than seven years.

April permits roared.  And permits are the seeds that sprout new homes, which means more business for companies like Bluelinx and its 38 warehouses across the country.  

We recommended Bluelinx back in August, 2014.  After racing up to $1.39 from our buy price of $1.15, it’s slid back down.  Earlier in the spring, the stock was below a dollar, but it’s rebounding now, and we like the direction it’s headed in.

Last month, BXC traded above a key support level, but the stock price is still in a channel, not showing much movement.

That could change.  And it could change in a hurry.  I like the chances of BXC edging back to $1.23, breaking through resistance, and getting back on a roll.

The company is cutting some of its costs.  Operating expenses for Q1 were down, and revenues were up modestly.  The challenge for the company is delivering better margins.  The cost of sales has been growing more quickly than revenues.  

The combination of reining in this cost of sales, and catching the rising tide of new home construction, can easily put Bluelinx on a strong trajectory.

 Action To Take

  • Hold Goldfield (AMEX: GV)
  • Hold Bluelinx (NYSE: BXC)

Category: TPS Update

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