Schnitzer Steel For The Present, Tilray For The Future

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There’s not a lot on the earnings calendar for the week of April 4 through April 8, but there are two stocks that are interesting to me. Steel recycler Schnitzer (SCHN) and marijuana company Tilray (TLRY) both report on Wednesday morning and they provide an interesting contrast.

Let’s start with $1.5 billion market cap SCHN – a stock that is working now and I expect to continue working for the foreseeable future.

SCHN is an interesting stock because it buys, processes, and recycles used cars, home appliances, industrial machinery, and manufacturing and construction scrap, which gives it an environmentally friendly slant for a steel producer. In other words, SCHN is riding two long-term trends: a scarcity of “stuff” and the need for environmental sustainability.

SCHN announced preliminary results on March 17 – and they look quite good. SCHN appears to be on track to earn $6/share in calendar year 2022, giving it a forward multiple of less than 9x. I wouldn’t hesitate to pick up SCHN shares on any post-earnings dip.

TLRY – a $3.5 billion market cap leading marijuana company – is a stock I assume more retail investors are familiar with than SCHN. However, TLRY has been under substantial pressure for the last year as speculative growth stocks went out of favor. TLRY lost ~90% of its value over that time period before getting a bounce the last couple of weeks as Congress moves to decriminalize marijuana.

I like TLRY long-term as marijuana becomes socially acceptable, legalized, and integrated into the culture. However – even after losing 90% of its value – TLRY is still not a cheap stock. While SCHN trades at 4x-5x my 2022 adjusted EBITDA estimate, TLRY is closer to 60x. While I think it will grow into that valuation, TLRY is a long-term story.

So keep an eye on SCHN and TLRY on Wednesday morning. I think both stocks may make you money from current levels – though TLRY requires a long-term mindset while SCHN is likely to work from the get-go.

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