For his model portfolio, John Reese, editor of Validea, selects stocks based on the long-standing st...
Marten Transport: A Split in Trucking
08/30/2017 2:54 am EST
Neil Macneale focuses exclusively on stocks that have announced splits; each month he adds one new stock to his model portfolio. Here's the latest buy from his 2 for 1 Stock Split Newsletter.
Last month I looked at split candidate Marten Transport (MRTN) and while I didn't add it to our portfolio, I felt it would deserve another look. Now, I’m convinced this small trucking company is a better fit for 2 for 1 than any of the other candidates at this time.
Marten Transport announced a 5 for 3 split in June. In my view, a 5 for 3 split is not as strong as a 2 for 1 split but it’s better than a 3 for 2 split. But what makes me think it’s good enough for the 2 for 1 portfolio when, with very, very few exceptions, I’ve adhered to the “2 for 1 only” rule?
First and foremost, a stock split announcement separates a company from the list of thousands of stocks traded on the major exchanges and puts it on the list of only a select few names that possess the “Stock Split
Because I can’t find another 5 for 3 split, I can’t offer up an example, but my instincts lead me to think this is still a strong signal from the board that they believe future prospects for the company are excellent.
Marten is in the temperature-sensitive trucking business, primarily moving perishable food products all across North America. This niche has provided a very steady business in a field that others are reluctant to enter, probably because it’s just harder than ordinary trucking.
Not only does Marten do it well, it seems to also run its business differently and better than its competitors. The standout numbers are in the balance sheet — zero long-term debt to equity where the average for the industry is 178%. This could be important over the next few years.
Other good numbers include a price-to-book ratio of 1.95 and an enviable free cash flow. Not all of Marten’s numbers are great. Earnings, growth, and profits are solid but not impressive.
The strength of this small-cap, family controlled company is in its conservative approach to business, a virtue in short supply, in my opinion.
Overall, the stock split is really just the first screen of more than a dozen that I use to find the companies that eventually end up in the 2 for 1 portfolio, so I’m not worried bending the "2 for 1 only" rule.
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