2/7/2013 3:34:00 PM
NEWS BRIEF
“I have been looking for some time for an attractive way to invest in the rebounding North American Automotive market, searching specifically for companies without the European exposure and headwinds faced by so many of the large automotive manufacturers such as Ford Motor Company,” writes investor Brant Prewitt for Seeking Alpha.
One “tiny little company” that caught Prewitt’s eye is Chicago Rivet & Machine Co.
Noting that the “overwhelming majority” of Chicago Rivet’s sales involve customers involved in the North American auto industry, Prewitt said the company has “a lack of exposure to any European headwinds.”
“The company has a current market cap of only $19.83 million. However, it trades at a 14% discount to its net tangible assets, which are very near $23.1 million. This is a significant discount to the apparent liquidation value of the company,” Prewitt writes. “Furthermore, $7.4 million of these net tangible assets are cash or equivalents. These cash assets alone represent around 37% of the company’s current market capitalization.”
Prewitt also noted Chicago Rivet’s strengthening earnings growth — with revenue up 10.1% in the first nine months of 2012, producing EPS growth of 36.8% over the same period.
And Prewitt liked Chicago Rivet’s history of returning cash to investors in the form of special dividends.
Downsides to retail investors include the small size of the company, as well as rising steel costs, “substantial competition,” and the fact that Chicago Rivet derived 33% of its revenues from just two customers in 2011.
In its favor, Chicago Rivet “has a record of 78 years” with uninterrupted consecutive quarterly dividends, with interspersed special distributions of excess cash.
In conclusion, Prewitt called Chicago Rivet an “attractively valued company (that probably falls below most radars) that may continue to benefit from up trending auto sales in the U.S. while steadily returning cash to investors.” ©2013 GlobalFastenerNews.com
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