Sometimes an investor comes across undiscovered gem in the small cap space. A stock that few people have ever heard of but offers a compelling investment opportunity based on a combination of solid growth prospects, low valuations and a robust dividend yield. One such stock is Friedman Industries (NYSEMKT:FRD).
Friedman Industries, Incorporated engages in steel processing, pipe manufacturing and processing, and steel and pipe distribution activities in the United States. The company purchases hot-rolled steel coils, processes the coils into flat, finished sheet, and plate; and sells these products on a wholesale basis, as well as processes customer-owned coils on a fee basis. It also manufactures, purchases, processes, and markets tubular products, including line and oil country pipes, as well as pipes for structural and piling purposes. (Business Description from Yahoo Finance).
6 Reasons to pick up Friedman Industries at just over $10 a share:
- The stock yields a robust 5% and now pays out more per share than it did prior to the financial crisis.
- The company is not covered much by analysts. The one analyst that follows the company expects to them to make $1.19 in FY2012 and $1.46 a share in FY2013.
- The stock looks like it has bottomed, is showing increasing technical strength and just crossed it 200 day moving average (see chart).
- The company has a solid balance sheet with over 25% of its market capitalization in net cash.
- Insiders are holding tight and there even has been a slight addition to insider shares in the last six month.
- The Street has a price target north of $14 a share on Friedman Industries. The stock is selling at under 8 times forward earnings and just 12% over book value.
- The stock is selling near the bottom of its historical valuation range based on P/E and P/CF.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FRD over the next 72 hours.