Value Expert: Dull Is Beautiful

06/11/2015 7:00 am EST


Dull is beautiful; with stocks, it is earnings that really count, suggests Russ Kaplan, editor of Heartland Advisor.

A dollar earned from selling an Oreo cookie or a Coke is the same as a dollar earned from a social networking company.

Our best results have come from ordinary companies making unexciting products, but products that people both want and need.

Speaking of dull being beautiful, I have found a gem of an investment for a new recommendation called Trinity Industries (TRN), which produces metal products for a variety of industries but mainly the railroads. It also does rail car leasing.

Not the stuff of exciting investing such as social networking, but an investment that has produced great capital gains for us in the past.

What many investors often overlook is that major industries—such as the railroads—require parts for their operation as we saw recently with another newer stock recommendation I had regarding Precision Cast Parts.

Trinity Industries was founded in 1933 during the height of the great depression when many companies were going out of business. Getting started at such a time has always given Trinity Industries the discipline to maintain solid financial statements.

Besides being in great financial shape, Trinity Industries is very profitable with a return on equity of 20%. It is also undervalued by a lot of measures.

The stock has a price/earnings ratio of eight, which is about half that of the market averages and one of the lowest I have seen for a financially solid business.

The company’s Board of Directors has the kind of long-term perspective I like.

They own 1.8% of the company. The CEO, Timothy Wallace, owns 1,136,268 of the shares himself. There are no short-term quick returns here, but long-term value.

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