Back Up the Truck on Mullen Group

Mullen Group, which provides trucking and logistics solutions largely here at home in Canada, was well out of favour last spring. In fact, the stock price was down almost 20% compared to a year earlier. 

Not long ago, we wrote a blog on insider trading, arguing that there’s many reasons for an insider to sell their company’s stock but only one reason to buy it. 

As insiders started buying MTL in their personal accounts throughout May 2024, it caught our attention. That month, Chair Murray Mullen purchased $3,800,000 of stock between $12.75/share and $12.84/share. Its senior financial officer bought $322,000 at $12.90/share. A director bought $127,000 at $12.71/share.

Following our due diligence, we also bought the stock for suitable clients too, paying $12.96/share on May 31. The last two quarters have delivered favourable results, causing the stock price the spike over 9% in a single day both in July and then again last week after reporting strong earnings. Today, the stock price is over $15/share, representing a +16% price gain since our purchase. It also pays a decent dividend, yielding a not-too-shabby 5.5% each year, which its chair described as “sacred” during a conference call last summer.

Murray Mullen has a blunt assessment of Canada’s economy. Despite our government’s deficit spending, there’s no growth right now. The consumer is tapped out from the higher cost of borrowing caused by elevated interest rates. However, demand appears to have stabilized. In a zero-growth economy, the only way for this company to grow is through acquiring other companies and wiping out their unnecessary costs.

Since their initial public offering in 1993, Mullen Group has acquired over 80 companies. They’re a disciplined acquirer (as evidenced by their decision to sit on the sidelines in 2022 and 2023 when trucking valuations peaked). Mullen has built up a strong Balance Sheet, which allows them to buy competitors under favourable terms. By consistently generating positive free cash flow and owning its own real estate, which has a historical cost of over $650 million (representing half of the stock’s $1.3 billion market capitalization), it’s easy for Mullen to raise money in the bond market whenever necessary.

We expect more accretive acquisitions in the quarters ahead and continue to buy this stock for new clients.

-written by Jeff Pollock