Articles devoted to going against the crowd and investing in securities that receive very little attention are fairly commonplace. So rather than repeat the reasons why this is true, I am going to just give you the names of three unfamiliar companies that you can spend some time researching.
Admittedly, I have spent little time looking at the following names. What I do know is that they meet several criteria that I've found valuable to investment selection:
- Everyone seems to be ignoring each one of these names.
- Each company possesses a reasonable record of past profits.
- All of their stock prices appear reasonable.
The Daily Journal (DJCO) is a small-cap that publishes newspapers and websites in California and Arizona. Its portfolio includes 11 papers, including the Los Angeles Daily Journal and the San Francisco Daily Journal. The stock trades for $90, and the company has a market cap of $124 million. It also has no debt and cash and short-term investments of $103 million. Unless you are a devout value investor, you don't know a very interesting fact about DJCO: Chairman Charlie Munger has been Warren Buffett's partner for more than 50 years.
Ampco-Pittsburgh (AP) makes custom steel rolls and cast and other engineered products for industrial customers. This small-cap stock trades for $16, near a 52-week low, which values the company at $163 million. The balance sheet is pristine with more than $70 million in net cash, equal to about $7.20 in net cash per share. The shares trade for 10x trailing earnings and 85% of book value. Insiders own nearly 15% of the shares and the current yield is 4.5%. One thing to pay attention to when looking closer at AP: Since its inception in 1929 and throughout its history, it has acquired companies that have subjected AP to asbestos claims -- numerous little claims. I believe AP settled 1,500 claims in 2011 for a total of $22 million and about 8,000 asbestos lawsuits are pending.
Rentech (RTK) is a $429 million business that develops technologies that help produce synthetic fuels. As you can imagine, this line of work hasn't been the greatest return on capital business. What has been great is Rentech's nitrogen fertilizer subsidiary, Rentech Nitrogen Partners (RNf), which the company spun off last year. RTK owns more than 60% of RNF's shares. RNF boasts a market cap of $1 billion and is set to distribute around $100 million, perhaps more, in dividends this year. That makes Rentech's stake worth more than $600 million.
So there you have it. These are not Wall Street darlings by any stretch of the imagination and you probably won't make many social conversations at cocktail parties talking about them. But you may make some money, which is even better.