There wasn't much to get excited about in Tuesday's trading; even in value-land, my screen was filled with mostly red. Indeed, value got dumped quite a bit Tuesday, and the smaller the size, the greater the impact, as evidenced by the Russell Microcap Index's 2.05% drop. That's OK, though. That Index is still up 32.39% year to date and is outperforming Russell Microcap Growth (up 18.04% YTD) by 1,435 basis points.
One of the more fascinating small value names continues to be NL Industries (NL) , an underfollowed, little-known, sum-of the-parts story. It rose 10% Tuesday on 5x normal average volume on a down day for the markets. NL is up 45% year to date and 105% over the past year, but had topped out at $8.40 in April before falling into the low $6 range earlier this month.
To a certain extent, NL, formerly known as National Lead, will follow the path of the publicly traded companies in which it owns big stakes. Those holdings include Kronos Worldwide (KRO) (NL owns 30% of the company, a stake valued at $479 million) and CompX International (CIX) (NL owns 86% of the company, a stake valued at $223 million). However, on Tuesday, Kronos, which pulls the most weight, was down 2.4% while CIX was up just 1.5%.
I don't know why NL was up 10% Tuesday. However, with a fairly small float of just 8.3 million shares versus a total of 48.8 million shares outstanding (Valhi Inc. (VHI) owns more than 40 million NL shares, and that stake ultimately is owned by Contran and the Simmons family), a little buying interest goes a long way. NL currently yields 3.5% -- the company increased the dividend 50% in March -- and ended its latest quarter with $135 million in cash and minimal debt.
With a current market cap of $339 million, NL owns $702 million of KRO and CIX. That differential represents a significant discount, but that likely is due at least partly to the specter of litigation that goes back to its National Lead days as well as a liability on the books for environmental remediation costs.
Elsewhere, Krispy Kreme (DNUT) shares are off to an auspicious start after three days of trading. In that short time DNUT has traded as high as $20.45 and as low as $15.50, with average volume of nearly 25 million shares. Tuesday DNUT shares fell 11%, and I suspect this stock, at least in its early days, will be a trader's delight.
