Wednesday, December 14, 2016

Off the RAIL

It feels like just yesterday that I was writing about the overly beaten down stock that is FreightCar America (RAIL)...because that's not far removed from the truth. Just last month, it traded at a massive discount to book value. But that discount is now almost completely erased.

I foresaw no catalysts that would push this stock up in the short-term, and yet here we sit a month later with the stock up almost 50% following the Trump election bump. Predictions are hard, which is why I try to avoid making a thesis reliant on them!

As a result of the price increase, I sold out of my shares. This is not a buy-and-hold company from my perspective, but rather a highly cyclical one. Unless Trump can re-write the laws of supply and demand, I think the company faces some tough times in the near-term, and should the stock price go back to reflecting such high degrees of pessimism again in the future, I'd be interested in getting back in.

For now, though, I'm on the sidelines trying to find things that are cheap, and having a hard time doing so. Any suggestions?

9 comments:

Viraj Samani said...

Hi Saj,

Have you taken a look at RFP. One thing that still seems to be cheap in this post-election market. However, definitely significant uncertainties surrounding it.

Saj Karsan said...

It has come up many times over the years. What I can't get over is that they can't seem to make money, even on an FCF basis with capex < depreciation. It's hard for me to get interested in businesses that can't make money year after year. I'm more into the companies that are having one or two bad years but otherwise have shown an ability to be profitable.

Anonymous said...

Isn't RFP's story that they are in the process (possibly slow process) of moving toward higher margin products such as tissue paper and away from wood products and newsprint paper?

Anonymous said...

I'm having a difficult time finding cheap companies also. What do you think about SMTX?

Saj Karsan said...

SMTX looks like it is struggling. What do you like about it?

Anonymous said...

Yes they are struggling but their financials are beginning to improve - margins, cash flow, etc.

FrankieKTLam said...

How about JCS? Another Ncav and Gabelli is loading up

Saj Karsan said...

Re: JCS

Really tough business, IMO. Not sure it will be easy to stop the bleeding. Too hard pile for me.

Anonymous said...

JAKK?

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