Fiduciary Management, Inc recently released its Q3 2020 Investor Letter, a copy of which you can download here. The FMI Small Cap Equity Fund posted a return of 1.9% for the quarter, underperforming its benchmark, the Russell 2000 Index which returned 4.93% in the same quarter. You should check out Fiduciary Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the Q3 2020 Investor Letter, Fiduciary Management highlighted a few stocks and TriMas Corp (NASDAQ:TRS) is one of them. TriMas Corp (NASDAQ:TRS) manufactures engineered and applied industrial products. In the last one year, TriMas Corp (NASDAQ:TRS) stock gained 4.4% and on January 8th it had a closing price of $32.56. Here is what Fiduciary Management said:
“Description
TriMas is a global designer, manufacturer and distributor of engineered products for commercial, industrial, and consumer markets. The company operates in three business segments: Packaging (58% of sales), Aerospace (26%), and Specialty Products (16%). The Packaging business makes specialty closures and dispensers for consumer and industrial products that are sold to a variety of end markets. The Aerospace business is a leading supplier of highly engineered fasteners to the aerospace industry. The Specialty Products business manufactures high and low-pressure steel cylinders, natural gas-powered wellhead engines and compressors, as well as other products. In total, approximately 82% of the company’s consolidated sales come from the U.S., 12% from Europe, 5% from Asia-Pacific, and 1% from Latin America.
Good Business
• We estimate that TriMas’ ROIC is approximately 12%, which exceeds the company’s cost of capital.
• TriMas’ products typically constitute a small portion of a customer’s total production costs, but are critically important to the end product.
• The company’s businesses have relatively high barriers to entry. Each business segment exhibits one or more of the following characteristics: the products are highly engineered, patent-protected, sold into industries with stringent regulatory requirements, sold under long-term contracts, have well established and highly regarded brands, and/or the businesses have longstanding relationships with customers.
• The Packaging and Aerospace businesses are defensive, have the highest barriers to entry, contribute the vast majority of the company’s earnings, and should drive earnings growth going forward.
• The Packaging business’ dispensers and closures are mainly used in consumer non-durable products, and the Aerospace business sells its products to customers under long-term contracts.
• The company has a strong balance sheet and is easy to understand.
Valuation
• The stock trades at 15.0 times our next 12-months earnings per share (EPS) estimate, which is below the company’s 5-year average and is a significant discount to the Russell 2000 as well as other comparable companies serving similar end markets.
• The stock is trading at 1.6 times enterprise value-to-sales, which is below the company’s 5-year average of 1.7 times.
Management
• Tom Amato became President and CEO in July 2016. He has more than 25 years of broad industrial experience, having served in several leadership positions at global, multi-billion-dollar businesses, and as a CEO for companies owned by notable private equity firms, including The Carlyle Group Inc. and American Securities LLC.
• CFO Bob Zalupski joined TriMas in 2002. He has more than 30 years of business and financial management experience. Prior to being named CFO in 2015, he was Vice President, Finance, Corporate Development and Treasurer.
Investment Thesis
TriMas is a collection of above-average businesses. COVID-19 has negatively impacted two of the company’s three business segments, causing the stock to come under pressure. Offsetting these challenges, the Packaging business (dispensers and closures for cleaning and hygiene products) has experienced a strong increase in demand as a result of the pandemic. We believe the strength in the Packaging business will more than offset weakness in the company’s other segments. Given the fairly resilient fundamental profile during this difficult time, we view the current valuation, at only 15 times the next 12-months EPS estimate, as attractive.”
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In Q3 2020, the number of bullish hedge fund positions on TriMas Corp (NASDAQ:TRS) stock decreased by about 18% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in TriMas’ growth potential. Our calculations showed that TriMas Corp (NASDAQ:TRS) isn’t ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
