SMID - a stock as solid as the concrete products they make

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I am here to present to you the reasons I believe Smith-Midland will provide good returns for your portfolio in the short term and long term. This DD will be more of a macro overview of the company as I am not well versed in Technical Analysis, so I am just trying to look at the big picture. (I am sure people can add TA and financials below)

So who or what is SMID?

This company works in developing, manufacturing, marketing, leasing, licensing, selling, and installing of precast concrete products.

The company has a large assortment of licensed and patented products that are used in a variety of construction projects both private/public/government. Some include SlenderWall Lightweight Construction Panels, Sierra Wall, J-J Hooks Highway Safety Barrier, Soundwall products, Erosion control Modules and many more.

Pros: I am looking at the infrastructure bill as a big opportunity/growth/catalyst for this company.
Cons: Maybe the fact that the majority of their business is tied to the east coast, and obviously Covid uncertainty. (let me know if you think or know other cons as I am sure there are more)

2019: In SMID 2019 Third Quarter Results Mr. Smith concluded “We continue to execute on our strategic plan and position the business to take advantage of positive market fundamentals that support sustainable, long-term growth in construction spending, including increased infrastructure investment in the markets we serve.” Adding that company business remined strong with continuous bidding in our two main end markets of infrastructure and high-rise building construction.

I also noticed a push within the company starting before 2018 to increase Barrier Rental Services (they see a need within construction that they can tap into and rent out these barriers for a profit to construction sites)

This is all before Covid-19

2020: There is a significant increase in EPS to $0.38 an increase of 58% compared to the prior year.

CEO Ashley Smith says “We continue to grow barrier rentals, which yield higher margins and drove the bottom-line earnings growth, despite product sales being down for the year. The outlook over the next 2-3 years still looks strong with infrastructure spending continuing to increase in our geographic region.”

Barrier Rental revenue is up 74% from 2019 with help from short-term special projects in the quarter.

Increased efforts on accounts receivable have improved our cash and investment position to $8.7 million, which exceeds total long-term debt of $7.8 million.

2021: EPS increases again. Also the Infrastructure Legislation is signed into law.

“The strong tailwinds due to the recently announced “Infrastructure Investment and Jobs Act” are expected to generate significant opportunities across our portfolio of proprietary, patented, and customized products.”
SMID goes on to talk about their approval in 38 states for their patented JJ-Hook highway safety barriers. They provided these barriers for large road construction projects and the largest civil construction contract ever awarded by the Virginia DOT. This further demonstrates the markets adoption of the barrier rental business model. This expansion in rentals leads the company to believe they are going to preform even better with rentals when compared to their historic quarters for late 2020 early 2021 for rentals.

“Our royalty revenues are also on a strong trajectory posting 40 percent and 53 percent increases for the three and nine month’s results, respectively.”
They conclude the highlights by saying the biggest challenge they could face would be global supply chain and logistic disruptions as well as continued impacts from the pandemic.

Luckily SMID claims to have invested in a proactive stance on raw material inventories and as a result this has provided stability in supply for their customers despite global disruptions.

Some Financials
P/E: 29.69 (I think this is justified based off the high growth the company is experiencing)
Please help me with more relevant ones below

Some Competitors: Chase (CCF), Chiyoda (CHYCY), BlueLinx (BXC), Quanex Building Products (NX), Hovnanian Enterprises (HOV), VSE (VSEC)

Disclaimer I own shares in SMID. Invest at your own risk, this is not financial advice.

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TLDR: The barrier rental business is strong, and the fleet is expanding. Sales initiatives are gaining traction as evidenced by the recent SlenderWall win with a direct customer as the Company intends to aggressively pursue market share. The Company’s growing licensee network generates healthy royalties and extends the geographic reach of the Company’s patented products. Regulatory tailwinds, including, but not limited to the “Infrastructure Investment and Jobs Act,” which marks the largest infrastructure investment in U.S. history, and macro off-site modular construction trends favor Smith-Midland’s portfolio of products over the long-term.

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Nice DD! Noticed it has support at 40, 37.5, and 35. I like the company but personally want to wait for it to find a top or retrace back to test one of the supports before entering.

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Thank you! It is missing some technical analysis, or I would prefer it to have more but I want it done right by someone who knows better.

I personally entered on the 3rd of December after watching it a few days waiting for a dip. I found this stock on a whim luckily right before it really started to run, it was just lucky that it was a concrete company with direct ties to this new legislation.

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I’m going to provide some EWT analysis JUST to give you a bear case as well in the immediate.

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So there’s a lot of lines there. Basically Elliot Wave Theory says that most things happen in Waves of 5 following the pattern Growth, Correction, Growth, Correction, Growth. At the end of the 5th wave, a correction will follow.

Looking at the 30 minute charts, it looks to me as if it has already completed all 5 waves and is now likely to enter a state of consolidation until a catalyst breaks it. With earnings “expected” in March, there’s a chance this could march down or consolidate until that time. To me I think the legislation triggered the “price it in” movements, and the bullishness may have already passed.

But there’s good news to be skeptical about the EWT analysis as well:

Correction after the third wave (the second growth wave, shown in the slightly less transparent Fibonacci retracement) is ALWAYS complex, such that there are 5 distinct points in the correction that precedes Wave 5 (points being simply ups and downs). In this model calling it 5 steps MAY be a bit of a stretch, and what we could have just witnessed was a very long, extensive wave 3.

If that’s the case, the chart is updated to show a much more extended Fibonacci retracement:

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And, pursuant to EWT wave 4 (correction wave), we would expect the price of this stock drop to the $43-44 range before going for another growth run. This run would be much less significant than the growth that just occurred, however there would still be money to be made in the short term.

In summary, based SOLELY off TA and assuming no fundamental triggering event to kick off another series of waves, we could see one of two things:

  • Stock slowly drops until some kind of catalyst triggers a buy event
  • Stock drops to $43-44 as a standard correction and then goes slightly higher than it just did

With all the good fundamentals happening with this stock, though, I think this is certainly one to watch especially heading back into earnings season.

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Red day today, down 2% ish to a support of 36 flat. Maybe look to enter if it is not bleeding tomorrow. Hoping for the best, still open to any and every TA for this stock. :grinning:

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Just a heads up to anyone who cares, but this could be a potential good entry based off the 35 support level. I’m still holding and only up barely now.