August 9, 2017
Hey Everyone,
Quick note on one of our favourite companies, CCL Industries (CCL.B). They’ve been on a steady decline for a couple months now, and granted they are quite a popular holding in many portfolios, so perhaps they were a bit richly valued. That being said, yesterday I read their earnings report and it was one of the most impressive I’ve read yet. So why are their shares dropping?
Well, the only taint in their earnings report was that one of their major divisions, Avery (perhaps you’ve bought their school supplies), didn’t do so hot. I skimmed through the earnings call transcript, and essentially, their 4 biggest customers are Staples, Office Depot, Walmart, and Amazon. As you can imagine, some of these companies are really struggling (thank you Amazon), and so Avery’s highest margin products declined in volume, while their lower margin products remained steady. CCL’s CEO concluded that they need to improve “the quality of earnings in that business.”
Regardless, Avery school supplies will still be bought year after year, and this year’s school season will be no different. Moreover, Avery is just one division in CCL’s vast offering of products and services, some of which include labels for everything from medicine to auto parts, loss prevention products for retailers (you know those things that make the storefront alarm go off if not removed), aluminum aerosol cans, glass bottles, and now polymer banknotes. Yes, that’s right, they literally print money. You can see why we love the company.
Have a great day! 🙂
Zach
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