Here are three Canadian stocks in the hardwood and hardware business that operate at various stages from manufacturing to consumer retailing. From outdoor, heavy-duty railway ties and utility poles to wood panels and fine kitchen cabinets and countertops, each has created a successful business harvesting North America’s vast forests.

Shares of Langley, BC-based Hardwoods Distribution Inc. (TSX—HWD) remain a buy for further long-term share price gains as well as modest, but growing, dividends.

Hardwoods has retained earnings and has made acquisitions. This has raised its asset level. We’ve raised Hardwoods’ quality rating to Average. That’s up by one notch from its former quality rating of Higher Risk.

On September 30, Hardwoods’ assets totaled $385.2 million. Subtract goodwill of $51.4 million, and the company’s adjusted assets drop to $333.8 million. This level gives Hardwoods an adjusted stage-one quality rating of Average.

Hardwoods calls itself North America’s largest wholesale distributor of architectural building products to the residential and commercial construction markets. The company operates a North American network of 62 distribution centres, as well as one sawmill and kiln-drying operation.

Stella-Jones: dividend aristocrat doesn’t come cheap

Saint-Laurent, QC-based Stella-Jones Inc. shares (TSX—SJ) have jumped by 13.3 per cent since July. This gives them upwards price momentum. But it also makes the shares costly—particularly given SJ’s lower expected earnings in 2017. The company remains a dividend aristocrat after raising its dividend for more than five years in a row.

SJ “is a leading producer and marketer of pressure treated wood products. The Company supplies North America’s railroad operators with railway ties and timbers [35.4 per cent of total sales], and the continent’s electrical utilities and telecommunications companies with utility poles [32.5 per cent of sales]. Stella-Jones also manufactures and distributes residential lumber and accessories to retailers for outdoor applications [27.1 per cent of sales], as well as industrial products for construction and marine applications [4.9 per cent of sales].”

SJ’s management owns nearly 77 per cent of the shares. This give you advantages. First, the company will be managed from a long-term perspective, since no outsiders can seize control. Second, the low public float means that even a modest amount of buying can push up its share price. Third, the limited float means the largest institutional investors cannot build a meaningful position—but individual investors like you can. Fourth, management has what’s known as ‘skin in the game’. This creates an incentive to manage the company well. Fifth, it makes management’s interests similar to yours.

The consensus recommendation of three analysts is Hold. Conservative investors might wait until SJ’s valuation improves before investing. Aggressive investors might buy for upwards price momentum and rising earnings. In both cases, you should hold the shares you already own.

Richelieu Hardware: very profitable but yields little

Saint-Laurent, QC-based Richelieu Hardware (TSX—RCH) has earned record profits for years. It’s expected to earn record profits this year and next. This has sent the shares up, which gives them upwards price momentum. The trouble is, the shares now look too costly and yield little. For conservative investors, we’ve now downgraded Richelieu to a Hold for long-term share price gains and small, but growing, dividends. Aggressive investors, however, might continue buying the company in order to profit from the positive momentum and earnings per share growth. The shares look costly. We rate Richelieu as a Hold.

Richelieu bills itself as a “leading North American distributor, importer and manufacturer of specialty hardware and complementary products . . . to an extensive customer base of kitchen and bathroom cabinet, storage and closet, home furnishing and office furniture manufacturers, residential and commercial woodworkers, and hardware retailers including innovation superstores. . . . Its production selection consists of over 110,000 different items targeted to a base of more than 80,000 customers who are served by . . . 37 distribution centres in Canada, 31 in the United States and two manufacturing centres in Canada.”

Richelieu’s customer base of 80,000 includes both manufacturers and retailers. This diversified customer base reduces its risk. So does the company’s diversified product offering of 110,000 items.

This is an edited version of an article that was originally published for subscribers in the December 2017/Second Report of The MoneyLetter.