Jewett-Cameron at Half of NCAV: Cut Losses or Double Down on a Broken Net-Net?
Over the last few months, the share price of Jewett-Cameron has gone down the toilet. I have owned shares for a couple of years, so I am not to pleased with my ~50% unrealized loss. When I bought the stock, the idea was the company was cheap, trading around its net current asset value, and they were trying to sell a property that is worth far more than what its stated book value is. Now the stock is deep in net-net territory, however the company’s losses are really stacking up. At this point I need to decide if I should cut my losses, or add to my position. In this post I wanted to lay out some of the pros and cons.
For some background, Jewett-Cameron is a holding company for a few different business. Their historic business was selling lumber to retailers. This is a commoditized, low margin business. Another subsidiary provides sound reducing wood paneling to the transportation industry. This is also low margin, and has been in a deep cyclical trough since COVID because less public transportation ridership. Two years ago, JCTC shut down their seed processing business. Then the company sells a few consumer products such as dog kennels, fencing products, and environmentally friendly dog poop bags. All of these have been affected by weak consumer spending that past few years.
It seems like Jewett-Cameron’s primary focus going forward is their metal fence posts that are more durable than wood posts, and their Adjust-A-Gate kits that allow DIYers to more easily construct fence gates. Out of curiosity I checked if these products are available in my local Home Depot, and to my surprise they were in stock. These products had hundreds of reviews and were rated about 4/5 stars. They seem useful, but more of a luxury purchase in a sense that they provide durability or convenience, but a customer could easily make do with regular wood solutions.
Another key aspect is that all of Jewett-Cameron’s products are made overseas, so they have been heavily affected by tariffs. The company worked the past couple of years to diversify manufacturing away from China by utilizing Vietnam. However Vietnam also got hit pretty hard with tariffs. The ever changing tariff policy made it hard for management to set prices of their products at the big box retailers. These retailers negotiate prices and were slow to allow price increases. The poor consumer environment and tariffs have caused JCTC to suffer worsening gross margins, and operating losses for over a year.
For some context, Jewett-Cameron had sales around $45M in 2019 and 2020. The stimulus check boom raised sales to $57M in 2021 and $63M in 2022. The following three years saw revenue steadily decline to $41M in 2025. At the peak in 2022, JCTC had a gross profit of $13.8M, compared to $6.3M last year.
Historically Jewett-Cameron had about 20% gross margins and 10% operating margin. Lately, gross margins have declined, and inventory loss reserves and write downs have exacerbated the situation. The fiscal fourth quarter of 2025 showed an inventory loss reserve increase of $650k, and Q1 2026 had a reserve build of $550k, as well as a $2.2M inventory write down. Gross margins for the last three quarters starting in 1Q26 are -12.5%, 8.2%, and 15%. These reserves and write downs are real expenses, but I want to estimate what JCTC can do going forward, so adding back the inventory losses increases 1Q26 margins to 19% and 4Q25 to about 15%. Later I will come back to estimating gross margins when trying to figure out scenarios for Jewett-Cameron’s cash burn.
Turning to operating expenses, the company had about $10M in expenses. In the second and third quarters of 2025, JCTC pretty much broke even. The last quarter of 2025 showed a $1.8M loss, and the previous quarter had a $3.85M loss. Losses like these are not sustainable for very long. Looking at the last four quarters, JCTC has averaged a $1.6M operating loss. If revenue and gross margins do not improve soon, Jewett-Cameron better be reducing operating expenses by half, which seems tough to do.
Based on the recent revenue and margin figures, I tried to estimate a few scenarios to see how operating profit/loss shake out. Last year JCTC did $41M in sales. Also for this estimate I will use $10M in operating expenses since that is the figure from last year. Assuming they do the same amount of sales this year, with 15% gross margins, then the company would have a $3.85M operating loss. If JCTC can manage $41M in sales with a 20% gross margin, things improve slightly to a $1.8M loss for the year. If sales revert back to the five year average figure of $50M, a 20% gross margin and $10M operating expenses would mean the company breaks even.
What makes Jewett-Cameron potentially interesting is that the stock is trading at a deep discount to its net current asset value. Last quarter current assets stood at $20.05M. Cash represented $1M of current assets, while inventory makes up $13.5M. Total liabilities are $6.4M, of which $4.2M is bank debt. This brings JCTC’s NCAV to be $13.64M, or $3.88 a share. Currently the stock is trading around $1.90 a share, so it is about a 50% discount from NCAV.
When thinking about net-nets, I do not mind some losses. The company is probably in a cyclical downturn or some other rough patch for it to be cheap enough to be a net-net. What I like to see is a net-net that usually produces an operating profit in the previous ten years. Many net-nets I see have constant losses, and therefore are issuing a ton of shares ruining shareholders. Jewett-Cameron had a good stretch of operating profit until the past couple of years. The fact they are losing money isn’t the end of the world to me, its the magnitude of these recent losses that has me worried. I referenced Evan Bleker’s book on net-net investing, and his rule was the stock should not burn 25% of its net current asset value in a year, while 10% might be an acceptable reduction in value. Jewett-Cameron’s net asset value has declined by 40% over the past year. As a side bar, I compared this to another money losing net-net that I own, Hurco Companies which has only produced a 5% decline in NCAV. Based on this large burn rate, Jewett-Cameron should probably be written off as a suitable net-net. However there is more to it that has made me keep debating this stock.
As I mentioned earlier, JCTC shut down their seed processing business a couple of years ago. They since listed the 11 acre Oregon property for sale, currently listed at $7.2M. Last quarter the company announced they listed another property for sale at $795k. The company has not listed their headquarters for sale, but Terry Schumacher has suggested it could be worth $10M and suggests the company should do a sale-leaseback. The carrying value of the two listed properties are $566k and $335k, so largely understated from fair value. Assuming these properties sell for their current listing price, and ballparking taxes, they could provide the company with about $1.70 a share in cash. Factoring in the sale of the headquarters could provide $3.80 in cash. On top of their current NCAV, Jewett-Cameron’s liquidation value could be around $7-8 a share.
Here lies the dilemma, current share price could provide a large upside if the the stock liquidated this instant, and my current shares would still make out fine. At current sales and margins, Jewett-Cameron’s business is not sustainable. Maybe by some miracle consumer sentiment improves so revenue bounces back, gross margins return to prior levels, or operating expenses is massively reduced. Normally I would expect managements to run the business into the ground instead of liquidating. However I think Jewett-Cameron is aware of the situation they are in. The listing of properties for sale is a good sign. Last year management adopted a golden parachute of sorts in case the company gets acquired or liquidates. Recently the company paid for consultants, hopefully to tell them they are screwed and should liquidate. Management’s commentary last quarter indicates they are open to selling subsidiaries, getting acquired, and other strategic alternatives. These signs indicate there are potential catalysts that could re-rate the stock closer to its liquidation value.
Given that Jewett-Cameron is trading at a deep discount to liquidation value and actively seeking strategic alternatives, I think I will add more to my position. In a quarter or two it will be clear whether I regret this decision. Continued heavy losses, increase in debt, or share issuance will cause me to reverse course and sell. Hopefully either operations stabilize or the management does something smart for shareholders soon.