"The Fence Industry" by Wall Street

We have all been affected by the construction slowdown - especially those who are focused on residential work. When will it come back? How can we forecast 2008 and beyond. Well, no single person or indicator could do that alone. However, "The World Famous Fence Wizard" is here to guide the Fence Universe and that is what shall be done.

Lets give Wall Street a chance to help. The Wizard has developed the following fund (first of its kind) of publicly traded companies that are directly related to fence material, raw product, and the Construction Industry. The idea is to evaluate a group of companies and stocks to get an idea of what Wall Street is betting on going forward. The difficulty is that there are very few publicly traded companies that focus on the fence industry. The test fund is diversified but the focus is on companies with a strong American presence; this is not an international gauge at this time. When it comes to materials such as raw steel, zinc or timber we must remember that such markets are without doubt related to the world economy, if zinc prices are up worldwide then zinc stocks will rise even if domestic demand is weak. Also - high raw material prices often indicate a strong market but we must recognize they directly hurt end users like Fence Installers who have to pay more for product. So if world demand for zinc is high - Joe Blow's Chain Link Fence Company will pay the high demand price regardless of the strength of demand in his market . Without further ado here are the fund selections, split into three groups:

1. Residential Related industries
TWP (Trex, the largest composite fence and deck manufacturer).
HD (Home Depot - we must included the giant in building product retail).
XHB (This is an index fund of U.S homebuilders...... new homes = new fences).
WLK (Westlake Chemical Principal is a leader in manufactured vinyl products including fence).

1year chart for this group: down 45% combined

3 month chart for this group: Down 32.25% combined

Conclusions - as expected, residential related industry has been hit very hard, the worst of our 3 subgroups, the sub prime fiasco seems to have pushed these stocks down further, the 3 month drop is substantial.

2. Commercial and Industrial Related Industries
ZRBA (Zareba Systems, Inc. is the world's leading manufacturer of electronic perimeter fence and security systems for animal and access control).
GVA (Granite Construction Co. is a regular play for those betting on increased spending on public works and building projects throughout the country)
DJ_2357 (Dow Jones Heavy Construction Fund - we all know that security and fence follow these projects at regular if not increasing rate)

1year chart for this group: Up 19.33% combined

3 month chart for this group: Down 14.66% combined

Conclusions: Stronger then the residential indicators because it is not dependent on the rise and fall of new homes and less dependent on consumer spending and credit worthiness. The Government will keep spending on public works -that helps holds heavy construction spending closer to constant.

3. Raw material / mining, lumber, chemical, steel etc.- again international demand affects this group and it relates to all types of end users. Did you know copper prices affect the cost of pressure treated wood posts?

VMC (Vulcan Materials;concrete and aggregate products).
DJ_1733 (Dow Jones US Forestry Index covers all the major lumber yards and mills).
DJ_1770 (This global mining index includes holdings in all the big names).
DJ_1757 (Dow Jones U.S. Steel Index)

1year chart for this group: Up 15.5% combined

3 month chart for this group: Up 8.5% combined

Conclusion: this group has gathered significant profit from worldwide demand for material, strength in these stocks, especially mining, will actually create a burden for domestic construction to recover as foreign demand drives up pricing. Another issue - the weak dollar makes it more and more expensive for American business to buy anything on the world market. For example - if a vinyl manufacturer is buying chemicals and oil derivatives it will cost more in dollars as our currency remains weak. Conversely, If you are drilling for crude in Texas you are benefiting greatly from a weak dollar that is helping to push up the price of oil. World markets are affecting your local company, it is important to understand why.

The Wizard Fence Fund Indicator totals:
All groups combined past 1 year: Down 3.4%
All groups combined past 3 months: Down 3.1%
This suggests that the forward thinking is very negative. We need to see the past 3 months beat the 52 week trend and turn positive in order to conclude any positive outlook is occuring on Wall St. Most of the weakness remains in residential building - this wont change much in 2008 and will likely get worse. Lets check back on this in 3 months and see if we can locate any improvement.

Here is a tip - try to avoid investing in any of stocks or etf's that i listed in the first two categories. In fact, you would want to do the opposite - short those groups (bet against them). As a member of the fence industry and the overall construction industry you already have significant risk and reward already built in to everything on the list. To be diversified, you need to invest in other industry. Remember all of the workers at Enron who had all of their savings in Enron stock..... bad idea. You could take a small stake in the "raw material" group - this would help "Hedge" your company against rising material costs in the same way that Airlines invest in crude oil futures. You too would want to have some investment in energy, this would help to "Hedge" your bottom line against things that hurt your company like higher fuel prices and electric bills. If stock in Exxon Mobile drops - don't worry too much, your probably paying less on fuel for the company fleet. Please remember - these are very basic concepts to consider and not right for everyone.

Related Articles of interest:
World Fence News Contributer Jim Lucci describes the tight rope for the fence industry.
Jp Morgan Analyst predicts Lumber Markets have reached bottom.
Matt McCall, president of Penn Financial Group says its time to look at investing in homebuilders.
World Fence News Staff Aritcle "December Field Report"

The Wizard 50 - Repost from the Fence Wizard.

The "Wizard 50" is a list of the most visited web sites in the Fence industry. The Fence Wizard has been counting web hits in cyberspace for some time in order to complete the first known Fence Industry traffic list. In doing so we make the following conclusions:
First - It is likely that more than 500,000 prospective fence customers go online each month for product information, company research, and to purchase material from online retailers. Online retailers represent the bulk of the traffic. This is a direct result of the paid advertising they do with google, yahoo, and msn to secure product ads on search engines.
Second - Many of these companies did not exist 1 or 2 years ago - this tells us that online retailing in the fence industry is still growing and new capital is coming in to create some of these companies.
Third - These online retailers are typically competing with Home Depot and Lowe's - meaning that they are pushing inferior product in most cases and often selling products with specs that most of us would refuse to install ....see one of the Fence Wizard's past articles on the subject -click here.

Now without further delay - The "Wizard 50" with traffic totals (these are unique visitors per month as averaged over the past one year)......

Hoover Fence Company (On-line Fence Retail) www.hooverfence.com/ 51,834

Trex (Composite Fence and Deck Manufacturer) www.trex.com/ 29,374

Chamberlain (Access Control Systems) www.chamberlain.com/ 25,870

Invisible Fence (The no fence of fencing) www.invisiblefence.com/ 25,443

Master Halco (National Wholesale Distributer) www.fenceonline.com/ 23,690

Cali Bamboo (Complete Bamboo Product Line) www.calibamboo.com/ 23,153

Academy Fence (NY and NJ Resi - Retailer) www.academyfence.com/ 21,301

Vinyl Fence and Deck (Bufftech and More) www.avinylfence.com/ 18,650

Amazing Gates (Gates and Access Control) www.amazinggates.com/ 18,404

Fence Center (Total Residential Fence Dealer) www.fencecenter.com/ 17,176

Garden Structure (Plans, Custom Wood) www.gardenstructure.com/ 17,009

King Architectual Metals (Iron Parts and More) www.kingmetals.com/ 14,336

Kencove (Farm Fence Supply) www.kencove.com/ 12,313

Fence Depot (Residential Fence Sales) www.fence-depot.com/ 9,839

Long Fence (East Coast full service) www.longfence.com/ 9,308

Husker Vinyl (Westech Vinyl Retail) www.huskervinyl.com/ 8,897

Discount Fence (Resi and Access Control) www.discountfence.com/ 8,819

A Vinyl Fence and Deck Wholesaler www.vinylfenceanddeck.com/ 8,614

Fence Wholesale (Residential On-line Retail) www.fencewholesale.com/ 8,328

Global Fence and Gate (Iron/Aluminum) www.globalfenceandgate.com/ 6,850

Austintown Fence Company (Vinyl/Alum.) www.afencecompany.com/ 5,559

Fence It (Strange link only page) www.fenceit.com/ 5,591

Ameristar Fence ( Leader in Metal Fence) www.ameristarfence.com/ 5,116

Better Fences (On-line Residential) www.betterfences.com/ 4,732

Artisan Precast (Concrete Wall Stamping) www.artisanprecast.com/ 4,303

Completely Random Links Page www.fence4less.com/ 4,072

Pool Fence (Removable Mesh Fence) www.poolfence.com/ 3,885

AFA (official site) www.americanfenceassociation.com/ 3,458

Ametco (Steel Fence and Industrial Products) www.ametco.com/ 2,937

Fiberon (Composite Fence and Deck) www.fiberondecking.com/ 2,670

Pacific Gate Works (Very Custom Gates) www.pacificgateworks.com/ 2,501

Buy Vinyl Fence (Complete Vinyl Line) www.buyvinylfence.com/ 2,483

Fence City (Delgard Aluminum Fence) www.fencecity.com/ 2,303

Vinyl Fence (Residential Vinyl) www.vinylfence.com/ 2,038

Great Fence (Residential Aluminum) www.greatfence.com/ 2,018

Merchants Metals (Complete Wholesale) www.merchantsmetals.com/ 1,997

Protect A Child (Removable Mesh Fence) www.protectachild.com/ 1,736

Select Fence Distributers (Aluminum Fence) www.selectfence.com/ 1,661

Royal Outdoor Prodcuts (Complete Vinyl) www.royalcrownltd.com/ 1,585

Outdoor Fence (Complete Residential) www.outdoorfence.com/ 1,579

Privacy Link (Vinyl Slats) www.eprivacylink.com/ 1,561

Bufftech Vinyl (Official Site) www.bufftech.com/ 1,498

Apollo (Complete Access Control) www.apollogate.com/ 1,480

All Star (Access Control Systems) www.allstarcorp.com/ 1,477

Pro Tarps (Privacy Screen and Solar Shade) www.protarps.com/ 1,425

American Fence Co. (Largest Fence Installers) www.americanfence.com/ 1,386

Danielle Fence Mfg.(Florida Full Service) www.daniellefence.com/ 1,357

Softward Design Specialists (Custom Software) www.fencesoftware.com/ 1,025

Boundary Fence and Railing Systems www.boundary-fences.com/ 984

Collins Company (Custom Screen and Mesh) www.collinscompany.com/ 931

All Horse Fence (Vinyl Rail and other Equine) www.allhorsefence.com/ 789

Kiwi Fence (High Tensile Fence) www.kiwifence.com/ 684

Country Estate (Vinyl and Aluminum Wholesale) www.countryestate.com/ 608

World Fence News (Key Link to News / Trends) www.worldfencenews.com/ 603

Builders Fence Co (Complete Wholesale House) www.buildersfence.com/ 456

Finding Employees

This is the best article I have read on the subject, it was brought to us from Fenceweek.

FINDING GOOD EMPLOYEES (using your cell phone)

Good employees, with a strong work ethic and knowledge of their trade, are already employed. When they want to change jobs, they can usually do so quickly. That is why, when you decide to hire an employee, you also need to move quickly.

Here is a method that some of our coaching clients are using and so far it is working great.

Write a four or five line ad, starting with "Top Pay for (insert job name here)." Then list briefly what you are looking for, i.e., experience, must have own hand tools, late model vehicle, good driving record, no drugs or alcohol, whatever else you feel is important. The key phrase is "Top Pay for . . . "

Put the ad everywhere you can: in the paper, on the Internet, on the bulletin board at the supply house. List your cell phone number - and make sure you have your cell phone with you to take the calls. When potential employees call in, here is what you say:

"I'm going to give you a 30 second commercial about the job, when I am done I want you to tell me if you can do it. You will be checked and evaluated during the first two weeks of employment so if you tell me you can do the job, be aware you will be checked and tested. I will not talk about money on this call. If you can do the job, we will meet later today or tomorrow morning, have some coffee, talk about the job, the pay and see if there is a fit between us. Is that fair enough?"

Now, notice that you won't talk money. That forces the potential employee to focus on the job requirements, and it stops your competition from calling and finding out what you are willing to pay good help. If the caller comes back with any questions about pay, they are the wrong person for you. Their focus is obviously on the pay, not the work, and it tells you they won't follow directions!

Give them the short commercial, describing the work and the requirements. Remember to keep it short and to the point. 30 seconds is plenty of time to tell them what you want. When you are done, you ask them, "Can you do that job?" If they say no, then say good-bye nicely. That is one less resume to look at, one less interview to hold - both you and the potential employee have saved time.

If the answer is yes, set a time and place to meet for coffee. When you meet, go through your normal hiring questions. If they measure up, hire them on the spot. Forget the resume and job history stuff. Good employees are not going to hang around waiting for you to go through the three to five week game of interviewing every guy in the world. Give your new employees a two-week trial period. If they make it through the first two weeks, there should be a second probationary period so you get a chance to really see what they are like and what they can do. The second period should be at least six weeks or more. At the end of the second trial period, you set their wage.

Remember, asking for resumes, former employers, and the rest of the fall-da-rah that goes with that approach seldom will get you the same truth that a short trial period will provide. If they don't work out, send them down the road and start over.

You should have an employee manual in place, and one job requirement is reading and signing the manual. If they won't sign the manual, don't hire them. In today's market, the deck is stacked more and more on the side of employees, and you must protect yourself and your company from those who are looking for a free lunch.

Using this approach, you will find that good employees are available, and they are ready to move ahead. Be ready to move ahead as well and you'll save yourself time and aggravation.

Final Comment:

I can't emphasize enough the value of a good employee manual.

I received a call from a company that terminated an employee. Almost a year later, the employee sued them for $26,000 for discrimination, etc. In your employee manual, include language that states they can only file a claim against your company for a period of 6 months after they leave. That limit has been upheld in the courts. Have your attorney write it, add it to your employee manual, and be sure that everyone, including long time employees, sign off on it. Cover Your Assets.

Join United Fencers Network (UFN) on Facebook

The United Fencers Network or UFN has recently been established on facebook. Facebook allows groups of the same ilk to converse, meet, and discuss common interests. The UFN will be focused on concepts and concerns that suppliers and installers are currently dealing with. The advantage of using Facebook for this enterprise allows free access to all who join, access to industry news, and instant communication with other companies, suppliers, and even customers that are literally around the world.

When you have a minute or two - stop by www.facebook.com - sign up - and look for the United Fencers Network (UFN). It's easier than running a 20' stringline and hopefully it will keep us all in line. Our consumers are online now - lets get back ahead of the game, get informed and connected. Let me make it easier::::
Here is a shortcut - follow the linkbelow:
http://www.facebook.com/p.php?i=773340998&k=Y6GZYVUZQWXMXEGDSJ46R

Everyone can join Facebook free and easy. To register, go to:
http://www.facebook.com/p.php?i=773340998&k=Y6GZYVUZQWXMXEGDSJ46R&r

"Correspondence" The Key to Project Management.

First off this post is specifically a guide for how to manage information from the moment you meet a customer until final payment is received. We are not tackling contracts, profit markup's, bidding, or any type of selling technique.........you are thinking: "What else is there?".

Now - follow this line of thinking: Once you sign a contract with a customer, general contractor, or any entity whatsoever; you are entering a "Legal Agreement". MOST customers will attempt to breach this contract by encouraging you to do work beyond the explicit agreement without compensation. Your goal as a "FOR PROFIT" business is to avoid providing free services at every possible opportunity!

You are reading more carefully now because you are now thinking of the last customer who did this to you - and it may well have been within the past week. Do not get into the truck ever again ready to kill somebody because you just caved in and agreed to provide extra work for a customer who is breaching what you thought was a clear contract for work. All of us have 10,000 of these stories so I wont write the full book here. Every contractor knows this problem; how do you keep yourself out of the work for nothing change order game?

Start Here. From the moment you meet a customer (by phone or in person) begin keeping detailed notes about everything the customer says. Even if they are using incorrect product language or descriptions WRITE IT DOWN and KEEP YOUR NOTES ! It is amazing how many customers will refer to the first or second phone call that you had with them and claim that they had implied for you to include a particular item in your bid (how could they possibly know that you forgot that conversation and did not include the diamond encrusted strike latch (dipped in liquid platinum). Well, the fact is they probably never mentioned the latch - but since you can't remember all 2,000 phone calls this week and you have no method to prove them wrong - you now have to give away the diamond encrusted latch and how on earth will you melt the platinum. While you must begin with good notes, you must take the time to reasonably list all important items and spec descriptions on your work proposal or contract. If your proposal is detailed and never mentions the special latch , then you have ground to stand on. If your proposal and contract never mention any product details - then it can't be assumed that you included or excluded the special latch. Please allow the latch example to be synonimous with (Part 203 F of the 300 page job book that you priced to the school district) or (Option 13 to the Army Core of Engineers that included adding six gate operators but deleting 1800' of a Concrete Retaining Wall previously listed in Option 7A and 7B.

Ok - so first we must keep good "Phone Notes" from day one; second a detailed work proposal or contract. Now the job starts; this means that unexpected events will occur - but before they do you are going to begin keeping a "Daily Project Log". Contractors who win lawsuits brought against them often have just one piece of relevant evidence: THE DAILY PROJECT LOGBOOK. Why? Because a Daily log is the only method you have for proving job site conditions, scheduled events, peculiar things, the light rainfall on Tuesday, your workers hours on site, and any other acts of God that can and will occur. Often small miscellaneous inputs in a logbook will trigger the memory of other things that happened 18 work days ago when the landscaping company was trenching along your posts holes (now a telephone cable is out and you are tagged with a bill for repair). There are millions of reasons to keep project logs; as a rule of thumb for small and mid size fence companies - utilize them for every public works project and every job that will account for 3% or more of your estimated yearly gross income. The format is not crucial but you need to include: the date, weather conditions, scheduled events for the day, worker list with time in and time out, safety meetings and sign ins, and the rest and often the majority should be for miscellaneous notes such as "Dave, the assistant manager, asked for workers to park on street instead of the parking lot for the duration of the project". (Knowing the exact day you were asked to do this could be important - hopefully it is not).

The Project Logs are essential but here is another tip that will not eat up any of your time or your foreman's time: Ask your customer to email you all questions or requests. I know you have email or you would not be reading this. Email is best automatic correspondence device. It marks the exact time and is an exact quote of whatever your customer wants or wants to know about. Email is the contractors best friend and it can bail you out of major disagreements if you can force your customers to use it. The fact is that when you get a cell phone call while you are trying to load a bobcat you are going to forget a certain percentage of the conversation. Very simply ask the caller to shoot you an email because you can't write the message down at the moment. This is the best habit you can get in; avoid blindly discussing project details when you are ill prepared to do so; the customer has the advantage in those scenarios because they prepared prior to calling you. Remember , whatever you say will be held against you when the customer is looking for free add on.

When you follow those basic steps you will have important reference tools for an argument, should one occur. The reality is that doing these things avoids arguments and misunderstandings. There is still the question of how to handle a customer that has a passive aggressive technique of pushing you into a bad position. You have to be tough and calm in these situations - a fight with the customer will never help you finish the job or get paid - never. If you can, avoid making any decisions at the moment a customer corners you. The reality is that a customer can and will develop a strategy to confront you on something you have not thought about and had no intention of providing. Being caught off guard often causes us to simply give in to requests because we feel nervous or unprepared. Listen to all requests, if you do not feel comfortable explaining any answers - then reply: "please let me review my notes and I will call you from the office" or "its a good question, let me review it with the boss and find out".
(SIDENOTE: Its always to your benefit to have a secret evil boss). If you can buy yourself some time you can make a better decision about throwing in the strike latch or presenting your customer with evidence that they chose the fork latch and what the change order amount would be "to add that item to the project". The reality is that sometimes you must throw something in to close out a job. When you provide anything beyond your agreement but decide not to charge for it- send your customer an invoice with the description of the extra work, the fair value price, and then credit the account for a reason such as "good customer discount". It is vital that the customer see what the value of the "free" service was. This encourages them to not actually think its free - reasonable people do not expect free things; they just want a good deal.

Again, unexpected events will occur on every job site and you must protect your company. We know this will happen - when it does:RELAX and do not take personal blame for not having Wizardly foresight. Use your notes and collection of correspondence to prove yourself right; you deserve to be paid for extra work. But are your employees doing extra work without you knowing??? Stay tuned to the Wizard, that article is coming soon.

For a far more detailed experience on the topic The Fence Wizard recommends these books:
Contractor's Guide to Change Orders
Construction Daily Project Log for Construction & Maintenance

New Truck Comparison: GAS VS. DIESEL

Often times we fall into the trap of thinking that overhead costs are generally the same for everyone and there is not all that much we can do about it. An average company can get away with that mentality; a great company scraps and claws for every possible cost advantage over their competitors. In a slow Fence Market - cutting costs and buying smart has never been more important for your bottom line. If you are in position to add or replace a truck in your fleet - we hope this diesel vs. gas comparison will help.

Numerous considerations must go into your decision. You have to worry about insulting the local Chevy dealer if you buy a Ford; will Jim (your best foreman) get mad that his truck is now the second newest because Franks 76' International is the truck your replacing and not his. Will your wife complain that you are spending 50K on a new "work" truck while she is still driving the Volvo that she has managed to dent on all four corners, top, and bottom. We can't calculate those items mathematically; we can estimate the cost per mile of a new truck. Your cost per mile vs. your evil competitor is all that matters here.
We all know that Diesel has outpaced the price of gas per gallon for some time now. Lets briefly review the past three years:
As you can see Diesel is projected to stay higher in 2008 but the cost gap is narrowing. The Fence Wizard Calculator says that Gas was running 5.5% cheaper than diesel in 2005 but that number is expected to narrow to 3.1% in 2008. Those who already own diesel trucks know that paying a small premium for fuel is well worth it - lets briefly review why that is the case:
Diesel trucks get much better mileage when comparing gas trucks with equivalent power (if you can find one). Overall Diesel maintenance costs are cheaper despite higher costs for oil changes; lets skip to the chase - Fleet Central has performed an exhaustive fleet review cost comparison for "Medium Duty" trucks. We will not bother re-inventing the wheel so here it is:
If you are not familiar with the depreciation line item ask your accountant if and how he or she is depreciating your rolling stock and read this depreciation guide.
Ready to go Diesel?
Popular Mechanics just completed a three-way comparison of light duty diesel pickups in their December 2007 issue (Fence Wizard readers may access the article and the video free of charge). They gave the trophy to the Chevy Duramax (fastest 1/4 mile and the best fuel economy of the bunch).The fact is that running 20 year old trucks will keep your cost per mile high - you have to ask yourself how much does one transmission failure 40 miles from town actually cost you? If your ready to upgrade - the Wizard recommends that you think Diesel.

Energy Information Agency
Get Popular Mechanics for just $1.00 per issue with this special Fence Wizard Link

Posted by Fence Wizard at 8:45 PM 1 comments Links to this post

This Website Under Consruction for 2008!

In depth analysis of the Fence Economy.

An expert review of the Fence Industry Economy; a gigantic body of companys - many of them private - that make up a multi billion dollar segment in the World Economy. Who are the key players and what are they doing next?

Come back for much more in the near future.

The Fence Economics website if part of the "World Famous Fence Wizard" Network.