• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Industrials

Unloved NL Industries Piques My Interest as Sum-of-the-Parts Investment

The value of its big holdings in Kronos Worldwide, CompX International and Valhi Inc. greatly exceed its own market cap.
By JONATHAN HELLER
Sep 07, 2018 | 11:00 AM EDT
Stocks quotes in this article: MANU, KRO, NL, CIX, VHI

Back in July, I was lamenting that I'd missed ou" on a couple names that I'd considered buying in a pullback. Two of them -- Fogo De Chao and Manchester United (MANU) -- never got all that close to my miserly price targets. Fogo was acquired, while MANU has enjoyed a solid run to an all-time high. A third company, confusing conglomerate Valhi VHI, has fallen below the $4 buy price, but I have not jumped on that one, either.

Instead, I recently took a position in NL Industries (NL) , which is a subsidiary of VHI that is trading in the mid-$7 range. NL is a potential sum-of-the-parts story, owning shares in three publicly traded companies -- Kronos Worldwide Inc. (KRO) (35.2 million shares), CompX International Inc. (CIX) (10.8 million shares) and (VHI) (14.1 million shares). The total current market value of those holdings is about $885 million, while NL's current market cap is just $368 million.  

While that may seem like a no-brainer, the math is a bit more complicated due to the way the some of the assets are accounted for, but suffice it to say the sum of NL's parts appears to be worth about twice its current value.

Unfortunately, there has been an overhang on NL for years regarding its sale of lead paint prior to the ban that began in 1978. But after a nearly 20-year legal battle with 10 California counties, the company agreed to settle the suit for $60 million. NL does have the cash on hand to pay for this settlement, ending its latest quarter with $111 million, or about $2.25 per share, in cash.

Overall, however, markets have not warmed up to the name. While NL shares did pop 27% the day the settlement was announced on May 16, they since have given all that gain back. Each of the companies in which NL has a stake has fallen the past several months. Since NL reached the settlement, Kronos is down 20%, CompX has fallen 12%, and VHI is off more than 50%. Considering NL's ownership stakes in those companies, NL will rise and fall based on how those three stocks are faring.

NL currently trades at less than 4x next year's consensus estimates, though because the company is followed by just one analyst the term "consensus" is rather misleading. Still, with little interest among investors, NL continues to plod along, unloved and unnoticed -- just the type of situation that I can find compelling.

It's certainly not without risk, however. I'm sure some investors immediately would be turned off upon finding out the name the company used from its 1891 founding until 1971: National Lead Company.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller was long NL.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Technology | Industrials | Stocks

More from Industrials

Here's the Boeing Trade I Made Today

Timothy Collins
Feb 24, 2021 12:06 PM EST

I love this chart and I'm woefully underexposed in this area.

Caterpillar Is Ready for Further Gains After a Shallow Correction

Bruce Kamich
Feb 23, 2021 1:36 PM EST

Here's where there might be a buying opportunity.

Whether Active or Passive, These 2 Deep-Value Portfolios Are Shining

Jonathan Heller
Feb 22, 2021 10:30 AM EST

Four months in, the 2020 Triple Net Active Versus Passive Portfolio experiment is proving to be a rewarding experience.

Screening for Quality Defensive Stock Plays Yields a Woefully Small Bunch

Jonathan Heller
Feb 19, 2021 11:00 AM EST

The pickings are slim when it comes to stocks that can meet the stringent standards of a stock screen based on Benjamin Graham's principles.

Cummins Reaches Our Target, Time to Nail Down Some Profits

Bruce Kamich
Feb 10, 2021 1:55 PM EST

CMI is a major China play.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • 12:31 PM EST GARY BERMAN

    Has the Short-Term Top Come for the XLF/Banks?

    The has triggered a long-term overbought signal ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login