As always, remember that these aren’t recommendations. I have included companies with market capitalization in excess of $500mm, but the list may not be complete.
The group has performed well over the past year as well as the past five years, with only one decliner in 2012, one that came close to matching the S&P 500 and three that gained 23-68%. Over the past five years, one stock hasn't traded publicly and one has declined, but the other three have risen substantially despite a small market decline.
I have included a column for net debt to capital, and three of the five have little or no net debt, while one is relatively high at 51%. I also included some long-term sales and earnings growth data, suggesting reasonable growth
Finally, in the last two columns, we see that the PE ratios are a premium to the market, but they are in line with or below their 10-year medians. Also, note that the range of PE ratios is 17-22, similar to the one-year EPS growth rates.
) is the best known auction site, but the biggest driver of its stock may actually be its Paypal unit. This stock is much, much larger than the rest. It's a market leader and could be interesting as an investment. I also think that it could potentially acquire one of the other companies.
) and Kar Auction (KAR
) both enable insurance companies to dispose of cars that have been totaled. CPRT has more recently gone direct to consumers looking to sell their used cars. The company recently entered several different foreign markets. The management team here has substantial insider ownership and takes a very long-term view towards the business, which I believe is a positive.
Ritchie Brothers (RBA
), which is based in Canada, has been the obvious weak performer. The company had a very strong record of growth prior to 2007, but the Great Recession weighed on its results. RBA hosts huge physical auctions at 44 different sites around the world, many with unreserved prices, and had 4.1mm different bidders in the first three quarters of the year. It has 110 locations in 25 countries and specializes in massive machinery and equipment for the transportation, agricultural, mining and other industries.
Liquidity Services (LQDT
) is one I have followed closely for more than a year. The company helps the government get rid of surplus items, and it also caters to retailers looking to dispose of returned merchandise. More recently, it entered the market for helping Fortune 1000 companies rid themselves of unused assets after completing an acquisition. The company auctioned $864mm of merchandise in the fiscal year ending in September. In addition to a strong balance sheet, insiders have substantial ownership.
So, hopefully I have given a theme to consider and enough information to begin your own investigation to identify risks and potential opportunities.
Founder, Invest By Model
and AB Analytical ServicesTradeKing All-Star Commentator
Disclosure: Long LQDT in one or more models managed by the author at Invest By Model
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