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Mueller: Pipes and Profits
04/04/2014 7:00 am EST
Each month, Neil Macneale analyzes the stocks that have announced splits; based on a proprietary screening system, he then selects one to add to the model portfolio of his 2-for-1 Stock Split Newsletter.
In considering an addition to our portfolio, we looked at EOG Resources (EOG), which is a big ($52B) oil and natural gas producer with decent numbers, but nothing too exciting.
It should be noted that return on assets, investment, and equity for EOG are all improving, but have lagged the industry over the last five years. We already have plenty of energy related companies in the portfolio so this is an easy one to pass up.
We also considered Westlake Chemical (WLK). Based in Houston, Texas, the company produces basic chemicals such as ethylene and styrene from oil and gas feed stocks.
The recent growth numbers for this company are very impressive, but these metrics are projected to taper off in the coming year. Other factors, including volatility that is well above the market average, score WLK the Number Two spot on our list.
Among the potential addition to our portfolio, Mueller Industries (MLI) may seem among the least likely. It’s a very small-cap company ($1.8B) and it’s not very well known (covered by only two analysts).
In addition, its story is not too exciting (it makes pipe and valves). However, if you are a plumber or HVAC technician, you have been using Mueller products for years.
This 97-year-old business, based in Memphis, Tennessee, is just the type of small manufacturer 2-for-1 has had such good results from over the years.
MLI has a very strong balance sheet, a low PE (10.4), and a below average measure of volatility. In recent years, capital spending has been well above average for the industry and earnings growth should reflect this in the coming years. Therefore, among the stocks announcing splits last month, Mueller is our top pick.
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