When you read the name 'Manitowoc' it probably looks like nonsense, but after this post I'm hoping it looks a bit more like '$$$$$$$$$' next time you see it.
Manitowoc Company (NYSE: MTW) is an industrial manufacturer that makes cranes, ships and food service equipment. The cranes are made under the names of Manitowoc, Grove, Potain, National and Crane CARE brands. Next time you are driving by a construction site having a crane on site, it is almost a sure bet that it was made by Manitowoc.
Why is this stock worthy of your attention? Easy, Obama's infrastructure plan concerning the replacement and repair of highways and bridges. Manitowoc makes the cranes needed to lift the heavy steel beams and concrete barriers needed in road and bridge construction.
Management: This is an area that I couldn't find too much info on beyond the company's numbers. Based on the company's history I'd say it is pretty well run based on posting a profit in 9 of the last 10yrs, and it is a growing company having acquired Shirke Construction Equipments Pvt. Ltd in July '07 and Enodis PLC in October '08. That said, news came down on Friday that the Chairman, Terry Growcock (yes, that's his real name), is retiring. Who is taking over and what this means for the future is still a bit of a question mark as of this posting.
Financials: As previously mentioned, Manitowoc has been profitable in 9 of the last 10yrs and has a low P/E ratio of 4.19. The stock has a 52-week high of $51.49/share and a 52-week low of $4.56/share. After crunching some numbers, I currently show a relative value of $98.58/share, an initial rate of return of 29.94% and an annual growth rate of 0.59%. My feeling on this stock is there is a ton of upside and built in value considering the price is currently at $8.75/share.
Outside Factors: Obama's infracstructure plan and low interest rates. As I already mentioned, Manitowoc builds the stuff that builds our roads and bridges. What I didn't mention though was the fact that interest rates are amazingly low right now. Despite the rough economy, this might be a good time for companies to take out loans for large capital purchases with the thinking that the economy will eventually turn around. Also, these interest rates might spur the start of some large scale private building projects which would also benefit MTW.
Performance to Date: I bought in to MTW at $7.19/share. As of this post, the stock was at $8.75/share to net a 21.7% gain in roughly 3-weeks of holding. The stock has seen prices as high as $9.88/share during the time I've owned it (37.41% gain over purchase price). I'm confident that MTW will rebound to a point closer to it's 52-week high at some point in the next 1-2yrs based on some of the factors discussed in this post. Even at $8.75/share a return to the 52-week high of $51.49/share is enough for a near six bagger! At my purchase price of $7.19/share, I'd net a seven bagger. This is a stock that I plan to invest further in over the next few months.
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4 comments:
Good analysis!
Do you think that there are other good buys out there for similar companies?
Should new management fumble the ball a little bit, I can see a competitor swooping in and getting some of the Obama business (if it does happen, but that's another issue).
Companies that are similar that might be good plays include Caterpillar (NYSE: CAT), Deere & Company (NYSE: DE), Terex (NYSE: TEX) and Astec Industries (NASDAQ: ASTE). I personally own CAT and have seen a nice profit on it so far. I've heard good things about the other companies but haven't yet done an extensive analysis on any myself.
MTW News & Updates:
1. Manitowoc Co.'s Terry D. Growcock, announced his intention to retire as Chairman, effective December 31.
2. Manitowoc Co. announced the completion, effective as of the end of the day on December 31, 2008, of the previously announced sale of its Marine segment to Fincantieri Marine Group Holdings, Inc., a subsidiary of Fincantieri - Cantieri Navali Italiani SpA (Fincantieri). The net purchase price in the all cash deal was approximately $120 million. Manitowoc intends to use the after tax proceeds for debt reduction and other corporate purposes.
3. The stock closed up 9.58% at $9.49/share on Friday and saw another 1.16% gain in after hours trading to put the price at $9.60/share. That's a very impressive one day move!
MTW is currently being driven down by the terrible market conditions to the point where it might see the $5.XX/share range very soon. Have no fear though, this is an excellent time to buy MTW.
In the book The New Buffettology, one point that is mentioned over and over again is to look for a company with a durable competitive advantage and to buy when it is cheap... the cheaper, the better.
In the case of MTW, they has a durable competitive advantage in lifting equipment. They make these machines under the names of Manitowoc, Potain, National, Grove, Travel-Lift and others. These are the names that show up on the vast majority of cranes and other similar lifting machinery.
Beyond that, Manitowoc has a durable competitive advantage with its commercial ice makers. Something I was unaware of until recently, MTW actually has an exclusive contract to product the ice makers for all Coca-Cola (NYSE: KO) dispensers made. Let's take a step back and think about that for a second because that's HUGE. For every Coca-Cola dispensing machine made that includes an ice maker (i.e., at least all of the fountain drink machines), Manitowoc makes the ice maker inside. When you consider McDonalds (NYSE: MCD) with 31,000 locations worldwide, Burger King (NYSE: BKC) with 11,200 locations worldwide, Wendy's with 6,700 locations worldwide, Sonic (NASDAQ: SONC) with 3,400 locations worldwide, and Subway with 30,500 locations worldwide just to name a few have exclusively Coca-Cola fountain drinks in their locations and many of these places have multiple fountain drink machines (typically 2-3 in the lobby area and 2-3 at the drive-thru if one exists), the number of machines with MTW made ice makers is HUGE. This doesn't include sit down restaurant chains, stand alone restaurants, movie theaters, retail stores, stadiums, or other venues where these machines typically appear either. Nor does it consider that other companies might use MTW made ice makers in their machines, even if it isn't done exclusively like in the case of Coca-Cola. Beyond those types of ice makers, MTW has a strong market share of the large commercial ice makers you see in hotels, restaurants and the like. Learning that info, I'd buy MTW just for it foothold on the ice maker market, let alone its dominance in the crane business.
Getting back to the point of price and value. The New Buffettology seemed to indicate that a P/E under 15 was typically a good buy for any durable competitive advantage company. While, as of this writing, MTW has a P/E right around 3 and a per share price of about $6.50 which makes this a screaming deal. As recently as June '08, MTW was trading at a P/E around 21 with a per share price of $42.55/share and saw a P/E of nearly 22 and a 52-wk high price of $45.47/share in April '08.
Assuming you could get in on MTW at $6.00/share and that the market took 5yrs to return to its '08 52-week high of $45.47/share, MTW would be a 7.5783 bagger and would get you pre-tax compound annual growth rate of 49.94%!!!
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