Speaker 1 (00:00):
Hi guys. I’m Tim Melvin. Welcome back to a better way to wealth. Now, yesterday, we talked about the big lie that wall street and the media are telling you and telling you that value investing is dead and you can’t make any money getting rich the same way Warren Buffett and Carl Icahn can. So I pointed out that’s simply not true. They can’t use these strategies anymore because they’ve got just too much money piled up from raking in commissions and fees from you for all these years. You and I, we can use this strategy to continue building wealth, to meet our financial goals, whatever those might be. I told them, give you an example of each stock strategy. So let’s just jump right in because there’s some really cool ideas here that I happen to like a lot. And I think can make you just any normous amount of money over the next several years.
Speaker 1 (00:47):
The first one is company called star tech security. That sounds really cool. Doesn’t it? It’s got a security in there. It’s just about cybersecurity is one of those exciting snacks. Is it about home security? We’re all worried about that. No, not at all this company. They make door locks for cars and they sell them to original equipment manufacturers. And then they make the electronic key fabs P fobs and all the new fancy ways they have of locking and unlocking your car. They are a major player. In fact, in north America, they are the largest player. There’s a very good chance if your car was built here in north America whatever brand it might be. But especially if it’s a Chrysler, Chevy Ford, because they’re, that’s their biggest customers and their, their biggest supplier. Your car locking mechanism came from this company, the symbol here, and by the way is S T R T. Now they also bought a company several years ago. They do lift gates and power tailgates for trucks. So that’s part of the business.
Speaker 2 (01:53):
And of course they sell these all over
Speaker 1 (01:55):
The world. One of the things that I like about this is that this gives you a chance. They sell into Asia and into China, but we don’t have to deal with the Chinese government problems. So the real growth for this company is going to be outside the United States because they already dominate inside the United States. Now this is an American company it’s right in beautiful, you know, the edge of beautiful downtown Milwaukee. It’s been around since 1,908. I would have to say that they know the automobile locking business. More importantly, they have contacts in the business that nobody else can match. They’ve got the edge on those contracts. They’re going to have it for a very long time. It’s very normal company because let’s be honest, making car locks is not an exciting business. That’s not an app as an Amazon. That’s not Google, that’s not laser surgery or cyber warfare.
Speaker 1 (02:49):
It’s car locks, very boring business. So it’s really not, you know, priced at this, this huge level. Now, the people that are running company own a lot of the stock. In fact, they collectively own about 7% of the company. So they have what I like to call skin in the game, in order for them to do well. They have to get the stock price higher, which allows us to do well. I’m just checking the numbers. Cause I don’t want to give you any bad numbers. They have just partnered a new program called vast, and this is going to help them grow. As I mentioned outside the United States, they are targeting with operations in Mexico, China, Argentina, Brazil, India, and Korea. So there are looking, they’re aware of where the growth opportunities are. They’re looking to expand this thing internationally. I think they’re going to succeed.
Speaker 1 (03:38):
They should be able to grow earnings at a very impressive rate. In the meantime, guys, we’re paying 87% of tangible book value. That’s a real bargain in a world where most stocks are trading at four times book value or more lots of upside here. It’s a profitable company that’s trading at just about six times earnings. There is massive upside to this company. As the global economy continues to improve the insiders, have their money that on the company, they’re going to be doing their best to get the stock price higher. I think that you could see this stock easily. Once this pandemic is once and for all behind us and the world economy continues to just expand and grow. There’s pent up demand for new cars out there, folks, and this company could easily triple or more over the next several years. So that start XML S T R T.
Speaker 1 (04:35):
It’s a fantastic company, fantastic story. It’s there’s little to no danger of this company experiencing any financial distress or anything like that anytime soon. And now the next company is trading below its liquidation value. In fact, that a pretty healthy discount to its liquidation value and that’s PNF industries, real simple story guys. They make hand tools, pneumatic handles and they sell to several different industries. The industrial companies, aerospace companies, they sail into retail outlets. Home Depot, I believe is their single biggest customer. So not real exciting. There are some barriers to entry for other companies. They’ve been around a long time. They have the great relationships. People tend to have a certain amount of brand loyalty with their tools. So I don’t see this as being a business. That’s going to go away anytime soon. There’s no way for a computer to replace a pneumatic Hansel.
Speaker 1 (05:32):
Even if we got robots, the robots are still going to use hand tools. So I think this company has a huge margin of safety in its core business going forward. So now let’s look at the numbers. My value of the business is I think I could liquidate the company rationally in a non-fire sale, non panic environment. I think selling everything off, paying off the bills. I think I could get $8 and 71 cents a share for the company. Okay. Right now stocks trading around $6 and 30 cents. That’s a huge discount. So just trading back up to a two, what the company could be liquidated for. He gives us a gain of 30%, but this company actually has the potential to grow going forward and have that value just being increased all the time. Also, I have to tell you, when I look at the business, I can think of about 10 different hand tool and tool companies and retailers were just make a tremendous amount of sense for them to just go ahead and write the check to buy the entire company.
Speaker 1 (06:35):
So this company getting bought out sometime over the next few years, not going to be a surprise to me, that would be a huge game for people who purchased the stock now and they discount to what it could rationally be liquidated for. I’m checking my notes here and see, oh, insiders here really have some skin in the game. They own over 50% of the stock. Now there are some old school deep value type activists, a guy named Andrew Shapiro at Lawndale capital. And he owns about 9.7%. He’s not afraid to get really pushy if he decides management needs to do things to unlock shareholder value. So having him in there, I think adds even an additional margin of safety. So PNF industries, P F I N again, little to no chance of any sort of financial distress first good thing that happens. The stock goes up 40, 50, 60%.
Speaker 1 (07:30):
Don’t discount it take over sometime in the next couple of years, extremely low risk, high reward situation trading at a substantial discount to what the company could actually be liquidated for. So next up is a company trading low on his cashflow and for cashflow, I’m using enterprise value divided by earnings before interest in taxes. That’s the measure that comes to us. Courtesy of our friends in the private equity industry have used it with wild success over the last 40 or 50 years, Lakeland industries, the symbols, L a K E. They make protective gear and clothing. Now there’s just PR primarily for oil and gas, the chemical industry firefighters but they have seen massive demand for their disposable PPE from unfortunately the COVID pandemic and they’ve been selling a lot overseas as COVID raged in places like India and Brazil, but guys, they’re starting to, you know, sell back into the U S market.
Speaker 1 (08:32):
Now, as we get waves starting to have severe impacts on many local hospitals and the supply of disposable personal protection equipment. So again, a simple story it’s there’s several utilities, oil and glass clean rooms in the semiconductor industry, that type of thing healthcare industry, obviously for COVID purposes, they’re growing earnings. Yukoner at about 16 and a half percent a year. We think that growth is going to continue for an extended period of time, actually. The industrial fire markets, which are their core markets, they are starting to return now to pre COVID levels. And that’s being boosted along with continued COVID demand their Matt, their biggest advantage. They own all of their manufacturing facilities. There’s none of this dealing with local manufacturers and giving away part of the profit to somebody to do the business for them. They own their own plants.
Speaker 1 (09:28):
Those plants are in China, Mexico, the United States, Argentina, Argentina, India, and Vietnam. So this is truly a global company. Again, I like the fact they’ve got a plan of Vietnam. They can sell into the Chinese market. They are not owned by a Chinese company nor are they located in China guys. This thing’s trading at less than four times earnings as measured by enterprise value to EBITDA right now, less than five times free cashflow. This thing is a cash generating machine that cash can be used to buy back stock. It can be used to invest in, in acquisitions that can grow the company. There’s all sorts of smart things that management can do with it cash.
Speaker 1 (10:13):
There’s a couple handful of analysts to, to follow the stock, excuse me. And they’ve been raising their estimates because companies surpassed our investment. The last four quarters in a row. You’ve got a great growing business folks trading here that could get continued demand from the worldwide pandemic. As long as that continues. And a recovering economy is going to drive earnings even further. You and I are only going to have to pay four times the amount of cash being generated by the business. Again, that’s in a world where the average company’s training it over 15 times, enterprise value to earnings before interest in taxes, massive upside. Once wall street discovers this thing, they tend to discover it every five or six years in the stock will shoot up, giving us an opportunity to cash out for huge gains. So Lakeland industries, symbols, L a K E. They make personal protection equipment. They are trading at a ridiculously low multiple of cashflow. So there’s one example, guys of each of my three strategies that wall street does not want you to know about because they make exactly zero money. When you use these strategies at a discount brokerage firm, ignore the ads, ignore the pressure to buy the big growth names that everybody else owns focused on three core strategies like this. Anyway, guys, I’m to Melbourne. That’s a better, that’s a better way to welcome and thanks for.
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