Jon Cramer

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    • Mueller Industries: Gearing Up for a Housing Recovery [view article]
      As someone that is in the industry, I can tell you that there are a couple of inaccuracies in the column above. 1) Mueller does FAR better when copper prices are high. Supply gets tight and they're able to pass on all cost increases to customers. Look no further than their record year of 2006 to see evidence of this. In addition to being able to pass on costs, it becomes VERY inexpensive to freight their product around as the value goes up. A truckload of copper tube used to cost a customer $50,000 back in 2002, 2003 and the freight as a % of sales ran 4%-5%. Now that same truck costs around $250,000 and freight is running them 1%. Lower prices are VERY BAD for Mueller. 2) Yes you can build a house without the stuff Mueller sells. It is called PEX plumbing tubing and it's becoming more and more prevalent across the United States. Lower labor costs and far lower material costs. Copper tube continues to shrink in the U.S. residential marketplace.

      I'm not saying this isn't a well-run company (though that is highly debatable with the current CEO undergoing cancer treatment and not working on a daily basis). But this stock has zero chance of doubling anytime soon unless some European company comes in and buys them because of the weak U.S. dollar. Other than price increases, Mueller really has no way of growing revenue. Their copepr tube volumes in terms of pounds are down HUGE from 6-7 years ago.       Mar 07 12:36 PM
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