By Investment U
What’s cooler than smartphones? Industrial strength fluid pumps, energy exploration gear, commercial refrigeration and bar codes. That’s what!
At least, that’s what Dover (NYSE: DOV), an industrial manufacturing company founded in 1947, says. It will be selling its communication and technology division that supplies parts for the two hottest smartphone manufacturers in the biz, Apple and Samsung.
In an age when everyone is carrying a smartphone, it seems counterintuitive to be leaving the business now. But Dover says it wants to focus on the more predictable segment of its business that has better and more reliable long-term profit potential over the sizzle of smartphones.
And profits are exactly what this company has delivered and will continue to deliver for a long time.
DOV has bulked up on its energy-related businesses in a division that specializes in bringing gas and oil to the surface known as artificial lift. In just five years it has gone from $250 million in sales to $1 billion.
And artificial lift, according to Oakmark Equity and Income fund manager Colin Hudson, has a long runway and recurring revenues. He puts the stock value at $100, 17% above its current price.
The other totally not sexy division DOV has that has huge potential is doors for commercial refrigeration – supermarket cases. No sizzle here!
The market for unenclosed cases in North America has an estimated value of $2.5 billion. This division alone, year over year, added 26% to DOV’s bottom line last quarter.
Here’s a stockholder-friendly company that has raised its dividend for the past 57 years, recently spent $1 billion in stock buybacks, raised both EPS and revenue estimates for this year, and is doing it all in markets that are more predictable, have greater and longer earning potential and more stable earnings than the darlings of the money press, smartphones.
They aren’t flashy, and they are getting even less flashy, but you can’t argue with their numbers.
An Airline That Gets It
This next company’s story is so funny and is such a great investment, it is both the second idea this week and our slap-in-the-face winner.
The company is Ryanair (Nasdaq-GM: RYAAY). It’s run by a guy named O’Leary from Tipperary. I know, this sounds like an Irish joke, but this guy O’Leary is my kind of CEO.
When he opened a new air route to Rome he greeted customers to the first flight dressed up as the Pope.
He has railed against overweight passengers on airplanes and wants to charge them more because they cost more to haul through the air.
He wants to charge to use the bathrooms on his planes and wants to remove one of the two bathrooms on short flights, less than 75 minutes, to add more seats. He figures one toilet is enough.
He throws temper tantrums and rails against anyone who gets in his way. Specifically, politicians, regulators, labor unions, competitors and, his favorite target, pilots.
Nothing is below this guy, and he says all of these antics are PR stunts. He will do anything to get people on his planes.
And it is working.
Ryanair is now the biggest airline in Europe, and travelers are flocking in increasing numbers. It serves almost 80 million flyers a year and is expected to run that number up to 108 million very soon.
Not bad for a company run out of a country of less than 5 million people.
Last year it reported a 13% jump in net income and a 13% rise in revenues, and it is expected to see the same percentage increases next year.
The stock price has doubled in the last year but, based on the projections, is cheap and has lots of upside.
O’Leary’s model is Herb Kelleher, the founder of Southwest Airlines, who stood the airline industry on its head with his no-frills, cheap fares. It is my preferred airline. I like the no-nonsense approach and the cheap fares.
O’Leary describes himself and his company as a bunch of Irish peasants who will stand on their heads to save a sixpence. I think that’s less than a nickel.
His great joy now is that he can’t hire any more people. He says they have nowhere to sit. This is what he calls controlling costs.
O’Leary’s next target is Aer Lingus, which he says is a money pit. He says he can make it work and make money. The regulators haven’t given the go-ahead – not yet.
By the way, the idea to remove one of the bathrooms on his aircraft will result in a 5% reduction in ticket prices.
I have only known a few like O’Leary, but I know this about his type: They get what they want and they don’t care what they look like getting there.
Take a look at Ryan Air.
Article By Investment U
Original Article: Unsexy Profits
