I've been watching this stock for years and never bought. You know why. But with the market cap now equal to the cash balance and a 7% yield, I just don't see how I can lose here. The operating business is worth $10-15. I think I'm looking at 30-50% upside with no downside risk here, and a dividend north of a bond yield for as long as I have to wait.
I know management is not shareholder friendly, but they're not thieves, and they pay a generous dividend. They have also recently done something they had never done before - buy back shares. Not aggressively, but it is a change.
<<<But with the market cap now equal to the cash balance and a 7% yield, I just don't see how I can lose here... I think I'm looking at 30-50% upside with no downside risk here, and a dividend north of a bond yield for as long as I have to wait.>>>
Many closed-end funds trade at significant discounts to net asset value for years at a time. This is true for fixed income closed-end funds that pay nice dividends like NPK. It might be safer to buy an fixed income mutual fund (open or closed at a discount) and avoid the operating and management risk of NPK.
This stock is trading around book value. Sadly, the company repurchased a good chunk of shares over the last year. NPK may have bought about 350,000 shares. Now, the number of shares outstanding is a hair over 7 million. It was 7.35 million last year. Despite the repurchase, the stock is going down. Recent insider purchases all occurred at prices above the current market price. Also, aside from two major stockholders, the other officers appear to own very little stock. That should tell outside investors a lot. Time will take its toll here, in many ways. Too bad for stockholders that management can't bring itself to do the right thing!
Are there any hidden values here? Does the company have idle facilities sitting on valuable real estate? At the current stock price, the kitchen appliance business has no value. But maybe the factories are worth something. Here's an idea: Sell the operations, put the cash into a few more municipal bonds, slash the workforce and make the leap to a closed-end fund. If the new fund continues to trade at a discount to net asset value, switch to the open-end format and erase the discount!
This Christmas could be a big loser. With fuel prices at today's levels, NPK is going to feel some pain. Those energy costs are coming out of NPK's already declining margins!
A visit to the NPK website is an eye-opener. And a quick look at NPK's history, as told by NPK, let's investors know there's trouble in River City!
The following statement appears at the end of the NPK history link.
"Forecasting the needs of the American consumer and seeking to fill those needs through a consistent program of product innovation, quality manufacturing, and aggressive marketing has been the objective of National Presto Industries for over 90 years and it will continue to be in the years ahead."
Despite NPK's desire to develop new gadgets, the company is fresh out of new ideas. Its website issues a call to all "inventors" to bring their ideas to Eau Claire for a test run. Judging from the on-line catalog (which does not offer on-line sales), it looks like all those Gyro T. Gearloose characters out in the garage are fresh out of ideas too!
The pizza cooker is the great hope of the new Millennium. But it looks too small in the picture. Let's hope the years of research behind this product at least led to designing a gadget of the proper size. But will it sell? We've started the fourth quarter of 2000. NPK always books more sales in this quarter than any other. At this time, how many orders does NPK have for the pizza gizmo?
Going back to the warm and fuzzy tale of the company's history, NPK introduced its first products in the early part of the 20th century and caught a big break in 1917. At that time canners were required by law to adopt certain standards which led to a windfall for NPK.
About 20 years later, a few new products were introduced. Then World War II broke out and the company began producing munitions. From the rhapsodic tone of the company's puff piece, it seems as though that may have been the peak period for NPK. The War was followed by the Fifties and everything conjured up by that term. The Eisenhower years were good for business.
The Sixties were somewhat of a bust however. Apparently the chief event of that decade was listing the stock on the New York Exchange. NPK colored the moment as though an NYSE listing carried the same level of gravitas as Queen Elizabeth's coronation. And though World War II was a bright shining moment for NPK, Vietnam did not warrant a mention. The Korean War was also overlooked.
Product development accelerated in the Seventies. But, according to the official history, the pace dropped off to one major appliance per decade in the Eighties and Nineties.
The following passages are also part of NPK's corporate history.
"The success of any industrial organization closely parallels its ability to meet the needs of the consumer on a consistent and continuing basis."
NPK also mentions that WalMart will trim its orders. That haircut will slice 14% off total revenue. Since WalMart accounted for 44% of NPK's sales, it looks like WalMart has cut its orders by about one-third. Shareholders haven't heard a peep about NPK's attempts to recapture those sales. And if WalMart is cutting one-third, you can imagine that further cuts are possible.
NPK disingenuously states that the WalMart cuts will have no material effect on fiscal 2000 results. However, the cuts are scheduled for fiscal 2001. Thus, shareholders should be told what to expect for that year! It's obvious that without the door opening at some new venue (like Target), fiscal 2001 will be a tough year for NPK's appliance operations.
Three of NPK's competitors were acquired in the last year. The companies were purchased on generous terms. Yet NPK languishes because its management could care less about shareholders outside of the company. The stock price continues to edge down, evidence that Wall Street believes the appliance business is worth nothing.