TMFDeej (99.47)

Intriguing IPO - CaesarStone Sdot-Yam Ltd. (CSTE)

March 21, 2012 – Comments (4)

In the past I was a very black or white individual.  Either you were with me or against me.  I either loved something or hated it.  As I have aged, I have realized that the world consists of different shades of gray or perhaps even different colors, rather than just being black and white.  No longer seeing everything in extremes is a wiser, not to mention healthier, way to live.

As someone who lived through the Dot Com implosion and watched the shares of many a high flying IPO eventually go up in flames, fortunately mostly from the sidelines, I came to regard most IPOs with much distain.  Recently I have seen that doing so is a mistake.  As I described in an earlier post, Proof of a market-crushing investment strategy?, dividend-paying IPOs have been absolutely knocking the cover off of the ball lately.

In my search for the next attractive dividend-paying IPO I have been keeping close tabs on the activity in the IPO sector.  I recently came across a company that I am somewhat familiar with and have been very impressed with its products.  That company is called CaesarStone...though its full name is a much more complicated CaesarStone Sdot-Yam Ltd. (CSTE).

So how did I become familiar with CaesarStone and its products?  My wife.  My wonderful wife, and I say that without a hint of sarcasm...she's great, has been itching to redo the bathrooms in our home for years.  She finally brought in a contractor who had done great work on a friend's home to give us some estimates.  While he was over assessing what we, OK she, wanted to have done we mentioned to him that we had been having a bee problem.  Yellow jackets were somehow getting into our house, at an alarming rate, though the problem had taken a break for the winter.  Well, this contractor took it upon himself to find the beehive in the walls of my home...free of charge, the next day hitting paydirt on the first try rather than tearing my entire house apart.  Needless to say I now feel obligated to get some work done on my house by this man.  Smart business, by both him and my wife.

That's a lot of unnecessary background information, but it's how I came to get my bathrooms redone and to find out about CaesarStone, so bear with me :).

CaesarStone is the world's leading producer of quartz countertops.  These countertops seem to be in the sweet spot to me.  They are very durable, like granite and marble tops are, yet they cost significantly less.  Why wouldn't you get quartz tops when they're essentially just as good as more expensive tops at a lower price?  Sure there's probably some snooty folks who will accept no substitute for the fanciest materials, but that's definitely not me.  Consumer's Reports quartz countertops and now so do I.

Here's the best part, quartz tops only account for something like 5% of the countertop sales in the United States right now (and slightly less than that on a global basis).  Compare this penetration rate to the rates in other countries like 32% in Australia and add in the fact that despite proclamations to the contrary I strongly believe that the U.S. housing market has at the very least bottomed and may very well begin growing again (al be it slowly) and there's a lot of potential growth for CaesarStone.

Of course if this stuff is so awesome what's to say that another company won't come along and begin producing quartz countertops itself.  To be honest with you I don't know and that's one of the things that would make me hesitate about buying stock in CSTE in real-life.  Plus the stock certainly is not screamingly cheap.  If it hits market at $15 per share, it would be trading at 17 times earnings and over four times its tangible book value.  I definitely plan to add CaesarStone in CAPS to keep an eye on it.

Her's a link to an interesting article about the upcoming IPO from the fantastic IPOdesktop :

IPO Preview: CaesarStone Sdot-Yam Ltd.

Here's a link tot the company's website for anyone who's interested:

CaesarStone.com

Is anyone out there familiar with this company specifically or the industry in general.  If so, I'd love to hear your thoughts.

Thanks for reading and have a fantastic evening!

Deej