The Mobile Mini Selloff Is A Buying Opportunity

Mobile Mini was a small holding in my portfolio. While a little smaller in capitalization than I usually buy, it is the kind of company I like to own because its business model is simple and predictable. The recent sell-off represented an opportunity to buy more and increase my holding.

Mobile Mini (MINI) provides storage solutions to businesses. They rehabilitate shipping containers, coverting them into storage units that can be placed onsite at a business that needs extra storage. They also build mobile offices with similar characteristics. The steel containers, if maintained, have almost indefinite lives. Thus, these units represent annuities for the company, as they purchase and convert the units and then receive rent indefinitely. The alternative for customers is usually truck trailers, but those are of lower quality and tend to suffer more from wear and tear.

Estimating the value of MINI is not a complicated exercise (not as complicated as analyzing most other companies, anyway). Therefore, when it sold off so severely recently, the stock afforded me an opportunity to own it for a generous return potential.

Investors are concerned about their exposure to the construction industry, though I think most are confusing their clients with homebuilders. They are exposed primarily to non-residential construction, though non-residential is showing signs of modest slowing. Indeed, they are exposed to economic conditions, and utilizaiton rates will probably decline modestly in a recession.

The economic sensitivity is factored into my analysis and my estimate of intrinsic value. The economy does go into recession from time to time, and therefore will affect my forecasts and valuation estimates. I think the current price represents a big discount to my estimate of intrinsic value.

Disclosure: Author is long MINI