January 2025: A Year To Watch
I started working on this issue early in the month, but I quickly realized I needed to wait and see how things unfolded before hitting publish. The first ten days of 2025 were already wild—New Orleans saw a terrorist attack on New Year’s Day, a Cybertruck exploded outside the Trump Hotel in Las Vegas, and California was hit with devastating fires.
Then, after Trump’s inauguration, things escalated quickly. Mass deportations began almost immediately. Tensions are also rising internationally—Trump has floated the idea of reclaiming control of the Panama Canal, tariffs on Canada and Mexico are set to take effect, and there’s growing uncertainty around Greenland.
Meanwhile, the war in Ukraine continues. On the financial side, several major U.S. banks, including Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo, have withdrawn from the UN-backed Net-Zero Banking Alliance. And just this past week, DeepSeek stunned the world by claiming to match OpenAI’s capabilities at a fraction of the cost.
And we’re only one month in.
I have a strong feeling 2025 is going to be a year to remember. It reminds me of 2020—packed with unexpected twists, geopolitical shifts, and massive economic shifts. I think we’re on the verge of a new space race, and that could lead to the U.S. and China competing in ways that will create enormous opportunities in infrastructure, manufacturing, and commodities. The landscape is changing fast.
This month reminds me of the saying: ‘There are decades where nothing happens, and there are years where decades happen.’ I wouldn’t be surprised if 2025 turns out to be one of those years. While it’s possible that stocks have a strong year, something tells me it’s time to hunker down and brace for a wild ride.
Markets are Expensive
As I look ahead to 2025, I have to admit I’m feeling optimistic about the economy. I think the Trump administration is going to pull out all the stops to bring his vision of "Making America Great Again" into reality. That said, it’s important to acknowledge where we stand today—and right now, markets feel expensive. I don’t mean to suggest they can’t go higher, but on metrics like P/E ratios and the CAPE ratio, they’re undeniably pricey. For me, that’s a signal to be patient and cautious with any new buys.
I recently read about Jean-Marie Eveillard, one of the greatest investors of the last 50 years. His story is fascinating: he avoided bubbles, maintained a "rainy day fund" with significant cash holdings, and managed to deliver stellar returns without taking on unnecessary risk. I love that approach. His disciplined strategy inspires me as I think about how to position myself this year.
Eveillard’s ability to step back when valuations were sky-high resonates with me. Like him, I feel that markets are stretched, but I also recognize the potential for certain sectors to thrive—especially with the massive AI infrastructure spending announcements from SoftBank, Oracle, and OpenAI. These developments could keep pushing share prices higher, even if the overall market feels frothy.
Oil and Natural Gas
One sector I’m particularly excited about is natural gas. It’s positioned perfectly to power the surge of data centers being built across the U.S. My top pick in this space is EQT Corp, a company I love and plan to hold indefinitely. Even at today’s natural gas prices, EQT should perform well. And if we get a colder-than-expected winter or a spike in LNG exports, it could do even better.
I’m also on the lookout for other opportunities in the natural gas sector, ideally an asset-light business that benefits from the increasing demand for gas-powered data centers. There’s enormous potential here, and I want to find the right way to capitalize on it without taking on too much risk.
As for oil, I think the Trump administration will push for increased production to keep prices stable. That likely means oil prices won’t skyrocket this year. But that doesn’t make me any less bullish. In fact, I’d be happy to see oil hover around $70 per barrel—a sweet spot that keeps both producers and consumers content. Right now, I hold a few positions that provide me with exposure to oil while paying a solid yield. These stocks also serve as a hedge in case a geopolitical event sends oil prices surging unexpectedly.
Manufacturing and Reshoring
I’m also bullish on manufacturing. I expect Trump to prioritize bringing more manufacturing back to the U.S., which could create a tailwind for companies in this space. This trend ties into his broader agenda of revitalizing the American economy, and it’s one I believe will continue to gain momentum.
One of my favorite picks for this sector is Mueller Industries (NYSE:MLI). However, its price has climbed significantly over the past two years since I started following it, and I’m not interested in chasing it at current levels.
Electricity Consumption
One of my favorite areas of interest continues to be electricity consumption. With the rise of AI and data centers, demand for electricity is only going to grow. Unfortunately, many of the stocks in this space have already run up in price, making it challenging to find good value. I’m on the hunt for companies with products that assist with power management and help reduce power consumption—a critical need as the world moves toward greater energy efficiency. Finding the right opportunity here is a priority for me this year.
Speaking of finding the right opportunity, I recently came across a company called Willdan Group. They’re all about helping other businesses save energy and modernize their systems. They work with all kinds of industries, from schools and hospitals to government agencies and utilities. What makes Willdan stand out is their focus on practical solutions—they help improve energy use, make buildings more efficient, and create long-term plans for sustainability.
It’s a business that’s right in the sweet spot for tackling big challenges like rising electricity demand and the push for energy savings. Willdan helps clients modernize infrastructure, improve energy use, and plan for long-term goals. They work with industries like utilities, government, education, and healthcare.
A great example is their recent $11 million project with the City of South Lake Tahoe. This project includes installing solar panels, advanced building automation systems, and energy-efficient power transformers. They’re even adding a microturbine for energy generation and a new ice plant with environmentally friendly technology. The goal? To cut emissions, save money, and help the city meet its sustainability targets. This is exactly the kind of practical, results-driven work that makes Willdan stand out in a world increasingly focused on smarter energy use. This company fits perfectly with the theme of rising electricity demand and the need for smarter energy use.
Financials
Annual Financial Information
| In USD$ | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|
| Contract Revenues | $510M | $429M | $354M | $391M |
| Gross Profit | $180M | $144M | $136M | $129M |
| Gross Margin | 35.2% | 33.5% | 38.4% | 33.1% |
| Net Income(loss) | $11M | ($8.4M) | ($8.4M) | ($14.5M) |
| EPS | $0.8 | ($0.7) | ($0.7) | ($1.2) |
| Shares Outstanding | 13.6M | 13.0M | 12.5M | 11.8M |
| Cash | $23M | $8M | $11M | $28M |
| Debt | $90M | $91M | $86M | $98M |
| FCF Margins | 5.7% | 0% | 0% | 10.7% |
| Free Cash Flows (outflows) | $29.3M | ($0.2M) | $1.3M | $41.9M |
| ROE | 5.7% | -4.7% | -4.8% | -8.6% |
| Share Buybacks | $200K | $1M | $3.1M | $2.9M |
Willdan’s Strong Quarter and Outlook
Willdan had an impressive third quarter, setting new records for revenue and profitability. Their contract revenue grew by 19% organically, while adjusted EBITDA saw a massive 50% increase compared to last year. Even more impressive, their adjusted earnings per share doubled, and GAAP EPS increased more than fourfold. This kind of growth signals strong execution and rising demand for their services.
Cash flow has been another bright spot for Willdan. Over the first nine months of the year, they generated $2.30 per share in free cash flow, reflecting strong operational efficiency. The company has also been reducing debt, cutting their net debt balance down to $39 million from $75 million at the end of last year. With a net leverage ratio of just 0.7x adjusted EBITDA, Willdan is in a strong financial position.
Their customer base is well-diversified, with 50% of revenue coming from government projects, 43% from utilities, and 7% from commercial clients. Government contracts, in particular, have been growing at a double-digit pace, while utility contracts remain steady under long-term agreements. The company is also benefiting from growing demand from AI-driven data centers, which require more energy-efficient solutions.
Looking ahead, Willdan has raised its full-year financial targets due to strong momentum. They now expect net revenue between $285 million and $295 million and adjusted EPS between $2.15 and $2.25. The company has also been expanding its capabilities through acquisitions, such as its recent purchase of Enica Engineering, which will add about $10 million in revenue in 2024 and contribute to higher margins in 2025. Overall, Willdan is positioned well for continued growth, especially as energy demand will be a hot topic for the foreseable future.
Trendpost Takeaway
Willdan is a small-cap company with big potential. Their asset-light model allows them to operate efficiently, and they’re in the right place at the right time—riding the wave of electrification and the growing demand for energy solutions. With AI driving electricity consumption higher and companies searching for ways to reduce energy costs, Willdan is well-positioned to benefit.
To get a sense of what Willdan does, let's take a look at some of their most recent project wins:
Another thing I like about Willdan is their diverse customer base. They serve government agencies, municipalities, healthcare facilities, and private businesses, meaning their revenue isn’t overly reliant on one sector. Whenever organizations need to improve energy efficiency or cut costs, Willdan is one of the go-to names for solutions.
That said, there’s one risk I can’t ignore. A major part of Willdan’s recent success came from helping clients meet ESG goals. With Trump back in office, ESG initiatives are falling out of favor, and that could impact demand for their services. It’s something to watch closely.
The stock has already had a strong run, up about 87% over the past year. I’m not in the business of chasing stocks at elevated levels, so I’m holding off for now. But Willdan is definitely on my watchlist, and if the right opportunity comes along, I’ll be ready to act.
Bracing for the Trump Tariffs.
As I press publish on this issue and close the first month of 2025, it feels like Canada is holding its breath in anticipation of the Trump tariffs set to take effect tomorrow, February 1st. The big questions: What impact will they have on our economy? How long will they last? Will Canada and the U.S. reach some last-minute agreement? No one knows for sure, but my gut tells me 2025 is shaping up to be a wild year.
If the tariffs go ahead, I suspect prices of imported goods will rise even further. Our Canadian dollar is already below $0.69 and could fall even more at this rate. If history is any guide, the TSX will likely open lower on Monday. Maybe that presents some good buying opportunities—time will tell.
Meanwhile, the Bank of Canada lowered interest rates by another 0.25 basis points this past week. That’s good news for businesses and stocks, but for someone like me looking for yield, it just makes it harder to earn over 4% on GICs or money market funds. If the government steps in with financial support for businesses impacted by tariffs, we could even see inflation come back, which might eventually push rates back up.
Right now, the Trendpost model portfolio is in a strong position, with 80% held in cash. My larger defensive positions are holding up well. This week, I finally pulled the trigger on InterRent REIT, adding a 50% position now that it’s below $10 and yielding 4.09%.
In December, I also added shares of UiPath (NYSE: PATH), a company in a sector that’s about to get really hot: Agentic AI. I won’t go into too much detail now—that’s for next month’s issue.
For 2025, my strategy is simple: no more buying unless the market sees a correction of at least 20%. The bubble may be nearing its breaking point, and I want to be ready when it does.
Portfolio Composition
| As of January 31, 2025 | |
|---|---|
| Category | Portfolio Weight |
| Cash and GICs | 78.97% |
| Speculative Picks | 3.06% |
| Defensive Picks | 17.35% |
| Crypto | 0.62% |
| TOTAL | 100% |
Remember that the content of this newsletter is neither a stock recommendation nor investment advice. This is just something to consider. You can access my watchlist and portfolio through the link below. By clicking the link below you accept all responsibility for any potential losses that might result from buying any of the stocks mentioned in this newsletter.