Mine Safety Appliances (NYSE:MSA)

mansloth (97.26) Submitted: 8/19/2006 12:53:23 AM : Start Price: $30.59 MSA Score: +28.63

Summary:

MSA is a great company to own, especially for those averse to risk. Management is top-notch so you won't have to keep an eagle eye on them. A family owned and operated business since its inception in the early part of the 20th century. Don't expect great performance over the next 2-3 years, but expect steady market-beating returns over the next 5-10 years. I'm putting this stock in a portfolio for my newborn daughter, who just turned 2 weeks old.

Pros:

Solid family-owned business and strong management with high insider ownership.

Revenue stream diversified across countries and industries.

Strong commitment to R&D which has succeeded in producing new products and fueled organic growth.

Should benefit from a world that seems to need increased safety and security.

Currently, looks a little on the cheap side: Price/FCF < ROE (about 0.87, for all you Ron Muhlenkamp fans). This indicates to me that the price shouldn't go much lower unless FCF dips.

Cons:

Roughly a third of the company's revenue is erratic and unpredictable. This includes military spending (ACHs and gas masks) and some firefighter spending that depends on government grants. Unfortunately, this third of the revenue also tends to be higher margin.

Company boomed in post-911 USA with increased spending for homeland security and increased military spending for the war in Iraq. Over the past year, this funding has begun to diminish and management is having to adapt to c