Small Cap Value Stocks That Get Acquired: Hot Asset Managers Reveal Their Latest Picks That May Be Snapped Up

• On 4:25 pm EST, Monday November 9, 2009

67 WALL STREET, New York - November 9, 2009 - The Wall Street Transcript has just published its TWST Small Cap Value Report offering a timely review of the sector to serious investors and industry executives. This 47 page feature contains expert industry commentary through in-depth interviews with expert Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Value - Capital Preservation - Sovereign Bonds - Precious Metals - Value-Investing - Companies with International Exposure - US-listed Chinese Companies - Risk Limitation - Industry-Diversified Portfolios - Long-Term Value - Micro-Cap Companies - Turnaround Situations - Strategic Buying - Fundamental Analysis

Companies include: Bridgepoint Education (BPI); Compass Minerals (CMP); Flexsteel (FLXS); Hardinge Corp (HDNG); Phillips-Van Heusen (PVH); Adobe (ADB); Affiliated Computer Services (ACS); Alliance Data Systems (ADS); American Water Works (AWK); Atlantic Tele-Network (ATNI); Celanese Chemical (CE); CenturyTel (CTL); Clean Energy Fuels (CLNE); Consolidated Graphics (CGX); Dell (DELL); Dillard's Department Stores (DDS); Drew Industries (DW); Educational Development Corporation (EDUC); First Acceptance Corp (FAC); Forestar Group (FOR); Fresh Del Monte (FDP); Hain Celestial (HAIN); Harbin Electric (HRBN); Huron Consulting (HURN); IMAX (IMAX); IMS Health (RX); Kennametal (KMT); Lamar Advertising (LAMR); NBTY (NTY); Nature's Sunshine Products (NATR); Nobility Homes (NOBH); Omniture, Inc. (OMTR); Perot Systems (PER); Pfizer (PFE); SPDR Barclays Capital International Treasury Bond Fund (BWX); SPDR Gold Trust (GLD); Silver Wheaton (SLW); Tellabs (TLAB); Temple-Inland (TIN); Tempur-Pedic (TPX); Tesoro (TSO); Valero (VLO); Verizon Wireless (VZ); Whole Foods (WFMI); Xerox (XRX).

In the following brief excerpt from just one of the in depth interviews in the 47 page report, a top tier portfolio manager discusses the outlook for the market for investors.

Jason Kotik is an investment manager on the U.S. equity team at Aberdeen Asset Management, Inc.. Jason joined Aberdeen in 2007 following the acquisition of Nationwide Financial Services' equity investment management team, where he had served as an assistant portfolio manager and senior equity research analyst since November 2000. Jason previously was a financial analyst with Allied Investment Advisors. Prior to that, he was a trading systems administrator with T. Rowe Price Associates. Jason is a graduate of the University of Delaware, and has earned an MBA degree from Johns Hopkins University. He is a CFA Charterholder.

Michael J. Manzo is an investment manager on the U.S. equity team at Aberdeen Asset Management, Inc. Michael joined Aberdeen in 2007 following the acquisition of Nationwide Financial Services' equity investment management team he served as a research analyst providing fundamental research coverage to the value team since September 2005. Michael was an analyst covering the machinery multi-industry/electrical equipment sectors at JP Morgan Chase and Company from July 2000 through August 2005. Prior to that, he was an equity analyst intern at Lepercq, DeNeuflize & Company. Michael graduated with a BS degree in business administration with a specialization in finance/economics from Fordham University. He is a CFA Charterholder.

TWST: Would you talk about some of the companies you have found attractive in recent months and the reasons why you selected them?

Mr. Kotik: One of the names that has been a recent purchase of ours is Compass Minerals (CMP). Compass Minerals has a multitude of businesses predominantly made up of highway deicing salt and sulfate of potash. So it's one of those specialty materials companies that is very well run. We've met with the company multiple times over many years, understand their asset base, and the stock had basically not done anything in the downturn. In the downturn it did come down, but the stock had not rallied significantly in this rebound that we discussed in the markets. Basically, they have strong pricing power in their businesses. It's mostly North American-centric, but they have a position in the marketplace in the Great Lakes region in salt, where there is tight capacity for highway deicing salt. And they're able to achieve pricing power a few percentage points a year. And because of that tight capacity, they've actually been able to take advantage of their assets - their mine in Ontario, where they are able to expand that capacity. One, we like that pricing power, we like their ability to be able to increase capacity and the fact that they've produced very strong cash flows. We took advantage of that, and that's been a recent purchase.

TWST: Any others you want to talk about?

Mr. Manzo: We also purchased and hold a good sized position in Drew Industries (DW). Drew manufactures components for the RV and manufactured housing sectors. The company holds a dominant position, is run by a very high-quality, experienced management team and over the course of the cycle routinely captures market share by outgrowing their competitors by increasing product penetration and making small bolt-on acquisitions. Drew has remained free cash-flow positive for the past four quarters, despite a significant decline in volumes. The company has very little debt on the balance sheet and a reasonable-sized cash position. So we are comfortable with the balance sheet. Management is a good steward of capital. They did make accretive acquisitions in the more difficult times, and we felt that the price of the stock more than reflected the precipitous declines in the industry. We just couldn't find an industry with a more depressed fundamentals than the RV and manufactured housing space, and Drew is a very high-quality player in both those spaces. You're starting to see a little bit of a turn in the recreational vehicle business, and we feel like it's well positioned for the next two or three years or so.

TWST: What about a name in the energy industrials area that you are favoring at this time?

Mr. Manzo: We also own a company called Kennametal (KMT). Kennametal is a machine tool manufacturer, mostly industrial production-led, and end markets include auto, general industrial, energy, mining. Kennametal is a nice combination of early-cycle businesses with automotive and industrial production, with a pretty decent exposure of late-cycle businesses with some of the energy markets. Kennametal is a very high-quality company run by a solid management team, throws off a lot of free cash, which we love, and has a reasonably clean balance sheet. Their competitive position is pretty dominant in most of the markets that they play in. Again, we purchased the stock at valuations that we felt were very attractive and a stock that we feel like we could own for the next two or three years.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 47 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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