CLS - Celestica

[stylized_fact]

Celestica recently tendered around 10% of its outstanding equity via a Dutch auction in the range of $7-8.

 

Over the past six months they have been buying back shares while the stock price has hovered near the company's stated book value.  Their current open market authorization covers around 7.5% of float at current price levels.

 

Operating cash flow is fairly healthy, Return on Capital is 12%, and their earnings yield is 11%.

 

They operate in a highly competitive business, and have high customer concentration.  Last year they discontinued their relationship with RIM, historically a large customer for them and this will hurt future margins.

 

It's a high conviction holding for Mackenzie Cundill.  I figured that the cross section of Canadians with tech familiarity here may lend further insight on the idea.

[Uccmal]

I am familiar with C, having held it at some point, in the mid 2000s.  I had a very quick look at the numbers, and it is still going nowhere in a hurry. 

 

IMHO, This is an example of a really bad share buyback.  Do yourself a favour and look way back at their numbers, to roughly 1997, before you invest. 

 

If they thought they could maintain the free cash flow they would institute a dividend, but they cant maintain the cash flow steadily.  Margins are too tight and too subject to cyclical factors.

 

Its a modern day Berkshire Hathaway Mill.