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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (55826)	3/14/2016 9:49:08 PM
From: E_K_S	Read Replies (1) \| Respond to of 78659

Sterling Construction Co. Inc. (STRL) - sold 35% of shares on earnings and company update I sold 35% of my shares @ $5.30/share w/ an average cost of $2.90/share. Shares have been held for just over 15 months. I booked an 80% gain on these shares but was hoping for much higher prices. The company has come a long ways in 18 months landing new contracts and booking better margins (from 2% to over 7%). The company still needs to pay down debt, work out their backlog maintaining their higher margins, sell extra/un-used equipment and move to rent/lease options and focus on profitable contracts while growing their business. The company continues to grow (perhaps as much as 20%) w/ many more contracts up for bid in the bridge & water/flooding area, their sweet spot w/ proven profitability. I have lowered my fair value target for 2016 based on their 2016 earnings estimates and reduction in their tangible BV. I thought it was prudent to take 35% off the table now and an equivalent amount later this year when they will have a better estimate of their 2017 growth targets. The major company turnaround has occurred w/ profitable contracts in place now (all w/ higher margins) and a new (sustained) credit facilities to allow business as usual. The key to value investing is not really when to buy but when to exit and how many shares to peel off as value is built back from the recovery. STRL may/could see a 25% growth rate in revenues in 2017 w/ new contracts (designed to completion) having the highest margins. This is the best case so w/ a $0.40/share high end estimate by management for FY 2016, the stock may/ could see $10.50/share. My short term target was $6.50/share coming w/ this quarter's report but that was not the case. There is still a lot left to accomplish by management tweaking contracts (w/ new bids on follow on work), better asset management rent vs own for equipment and paying down debt to increase credit facility amount and terms. If all done in spades, stock could reach $10.50/share by 2017 (over 100% gain from current price) but any slip up, maybe $6.50/share or no more than 30% higher from the current price. The risk/reward still good at the current price. I do like that their business is all domestic, mainly Texas, Hawaii and CA. No International exposure. Gains for me are all long term capital gains. Stock sales will be a source of funds for other new value plays. EKS