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One of the most influential authors on the art of investing for me growing up was Peter Lynch. Lynch, a superstar manager for Fidelity, specialized in investing in mundane businesses most investors ignore. Among some of his biggest winners were the old funeral home operator Service Corporation International (SCI) and the grease disposal firm Safety Kleen. I recently came across that sort of investment opportunity with Omega Protein Corporation (OME), which also has a strong balance sheet and recent insider buying.

"Omega Protein Corporation , a nutritional ingredient company, engages in the processing, marketing, and distribution of fish meal, oil, and soluble products." (Business description from Yahoo Finance)

7 reasons OME has long term value at just over $8 a share:
 

  1. Several insiders have been slowly accumulating new shares since late March.
  2. Omega Protein has a strong balance sheet with $16mm in net cash (10% of market capitalization)
  3. OME is selling near the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
  4. Consensus earnings estimates for both FY2012 and FY2013 have risen sharply over the past month. The prices received per ton for Omega's protein products have more than tripled over the past decade and the company should benefit from the increasing protein demand in the developing world.
  5. The company more than doubled operating cash flow from FY2009 to FY2011 and sells for four times OCF.
  6. The stock is cheap at under 5 ½ times trailing earnings and just 81% of book value.
  7. The stock looks like it has bottomed at $7, has improving momentum and just crossed its 200 day moving average. It was selling at $14 a share less than a year ago (See Chart)

(click to enlarge)

Source: A 'Mundane' $8 Stock With Recent Insider Buying