True, the past does not predict the future, but it's better than guessing the weather years out. We do know the current state of the company though- which is pretty sound. We also know it's being run by the same people, with the same strategies- both of which have done well in the past and during more difficult times than these. The problem with focusing on the future is not just that we're likely to be wrong, Events seem bigger and more ominous than they do in hindsight. That's where the money will be, no doubt. But the companies current state and past record at least keep us anchored in reality.
Yes, there are also cheaper steel companies. But WOR is more of a niche business, rather than a typical cyclical. Nucor looks nice, but I think WOR is the more diversified in it's product offerings. I think they're worth a higher multiple than most of their smokestack peers. I also have a bias in investing closer to home. It's easier to stay in touch that way. If those other companies are such bargains, let some of their neighbors buy them. Why aren't they?
I agree with some of your points. However, don't be misled by what happened in the past. The past is NO indication of the future. If it were, investing would be a whole lot easier. Saying that, the dividend may indeed be lowered. But what I'm more worried about is the P/E ratio. Competitors are going around 4 with one at a low of 2. The steel market is in a downward trend. In my opinion, RESC may be a better deal right now as far as steel stock goes. In any event, good luck and thanks for sharing your ideas.
Hey, you're welcome and thank you. A word of caution though....just because no single customer accounts for more than 2% of sales, doesn't mean that a whole industry slump (cars) can't hurt them. A lot of their customers will tend to be in the same place at the same time, but a single (say, GM) bandruptcy shouldn't hurt them too much.
Thanks for your excellent post of 06/28. Having started buying in Dec at over $20, I found your msg reassuring. Your msg pretty much sums up how I feel about the company, only you added info I didn't know, or had not thought of, and you stated it better than I could have. I also like the fact that according to Value Line they have never reduced the dividend, and the president of the company owns l6.7% of the stock. I was concerned that during the recent 3 month period, total long term debt had increased from 28% of total capitalization to 33%. According to VL, total debt increased from $288 million to $387.4 million, an increase of $99.4 million, while total interest increased from $24 million to $27 million. This would mean the new money cost them 3.02%. Obviously, I have missed something, but in any case, they picked a good time to increase their debt. Each time they buy back a share at $l6, they are buying back $2 worth of earnings, meaning they getting back l2.5% on their investment in common. VL estimates WOR will earn $l.50 per share next year. If so, they will be getting back 9.3%. So the additional borrowing will be accretive to earnings. I'm glad to learn that no customer consumes more than 2% of output. The large retailers seem to like to contract for a huge percentage of a supplier's output, and then they have them over barrel. With few other customers they are forced to make price concessions because their former customers have obtained new suppliers. It makes it very hard to resist demands for lower prices. Again, thanks for your excellent post. JJ
Good post...sounds like you know the company well. Looks to be a great value play. Dividends since 1968. over 4% yield...hmmm, seems like a no-brainer. I would hope an established company like this would know well how to "hang" through the tough times and prosper through the good. I for one, don't really subscribe to all the doom and gloom stuff. One must use the negativity in the media to take action when good deals present themselves. I only buy stocks when they are on sale. Worthington came up on my GARP(Growth At A Reasonable Price) screen, and now I'm in.
Anyone know where the Worthington name comes from?
"F" the fool...glad those guys are going to work every day writing their foolish things, while I sit here, retired at 45, and pick up shares that dumb asses are throwing away during the Wall Street fire sale. Typical garden variety sell-off.
Have a great weekend!
He starts his little diatribe this way:
" That means it prepares steel for customers after buying it from other manufacturers, and there's the first problem: The company is subject to unpredictable steel prices. On top of that, most steel companies require frequent investments in new processes and equipment to stay competitive. Those factors make it very difficult for a company like Worthington to beat the market over the long haul."
1.) What company does not buy raw material for producing products and subject to market forces. You might as well throw in the entire country of Japan too.
2.) New technology to keep competitive? DUH! What business does not have to do that also?
3.) Difficult to beat the market? That depends on a lot of factors here as far as stock price is concerned. As long as they do their business the way they always do, things will be just fine. BEating the market is a difficult thing as most companies do not "beat" the market as they are part of it. They beat the market only if the market is in love with them at that time.
I think that is enough to say about the idiot that wrote that trash. Pure empty thought writing and that is why the Wall Street Journal has been the standard for reading news for the last hundred years or so. Save your foolish money for a subcription to the journal and read real news instead of someone's non thinking opinion as you can get those for free right here.