Timken: Stay Defensive with this "Old Timer"

11/21/2019 5:00 am EST


Neil Macneale III

Editor, 2 for 1 Stock Split

I’ll be going back to the earliest memories of my interest in the stock market when I buy Timken Co. (TKR) for our model portfolio, recalls Neil Macneale, editor of 2-for-1 Stock Split Newsletter.

My mother had inherited a few shares of Timken and every three months the mailman would bring her a dividend check. I thought that was pretty cool, almost magic, and I wanted to learn how I could do that.

The “R” in the TKR ticker symbol stands for “roller bearing”. In 1899 Mr. Henry Timken invented the tapered roller bearing and, within a few years, 80% of America’s autos and rail cars were rolling on Timken’s bearings.

This is an example of the best in American industrial innovation and manufacturing capabilities. Although no longer a family owned business, John Timken, great-grandson of the founder, remains as chairman of the board.

There is no stock split in sight for TKR but almost all the other metrics considered important in the 2 for 1 stock evaluation algorithm are on the plus side of the line. A low PE (13.4) and a lower than average price-to-book ratio (2.3) are the first numbers to attract my attention.

The solid balance sheet, a 2.09% dividend yield, and a 5-year 17% annual earnings growth curve also contribute to paint the picture of a very sound, well-run, industrial powerhouse.

The Beta of 1.83 is the one number not to my liking, but you can’t have everything. We can expect the stock price to be one of the more volatile in the portfolio.

The stock price may be somewhat volatile but I’m counting on the company continuing to be a stable, reliable, and profitable provider of industrial products, as it has been over its long history.

TKR can be viewed as another defensive position our portfolio at a time when uncertainty in the economy and frothiness in the markets is worrisome. As always, I would prefer to buy a stock split, but given the lack of current split candidates, a solid old-timer like Timken will do for now.

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