Hanging On to 2 Industrials
It's pretty common to see a stock I own mentioned in a Fool article, but not very common to see two small/microcaps from my portfolio mentioned in one article. Jordan DiPietro did just that in Are You Hanging On to These Industrial Stocks? and I thought my comment to the article might make a nice blog entry.
The two I'm holding from Jordan's list are Graham Corp. (GHM) and NN, Inc. (NNBR).
NNBR is a 'coming back from near death' story. The company manufactures bearings, plastic/rubber parts and Whirlaway air conditioners and precision metal components. The weak economy, problems getting a new plant in China on line and debt burden had survival in question in early '09. Recently, sales have been increasing and the company reported positive earnings the past two quarters. It's not entirely out of the woods yet, but things have been looking up. I sold half my position several months ago (too early) and am playing with the house's money on this one. With a buy at $1.14, this is the biggest percentage gainer I've ever had. The share price has been on a tear lately. If the economy is in recovery, this could double from here. If we slip back/stay in recession, debt service could be a problem. No plans to add to it here.
The hit from a weak economy applies to GHM as well, but it has a balance sheet with lots of cash and almost no debt. GHM makes heat exchangers, vacuum ejectors – big, heavy stuff used in refineries and process industries. Orders have been weak, but the company has been profitable throughout the recession, thanks partly to a Navy aircraft carrier heat exchanger order. Nearly half the market cap is net cash; no danger of going under here. When/if the economy shows real signs of life, GHM will rock; until then it probably hacks around in a trading range paying the small dividend and continuing to build cash. Even with the US in a slump, sales to the Middle East and Asia help keep the eps in positive territory. With the caveat that I'm terrible at the buy-sell-hold thing, I'd rate this a buy up to about $16/share, maybe a bit more. I recently added to my position in GHM when it was under $14.
The two positions here combined are only a small percentage of my portfolio. Interesting companies, but not so interesting that I'm willing to take a big swing.
Both of these can be volatile and sometimes have thin volume and wide spreads between the bid/ask. If you're going to play, do your own research and use limit orders.