Article Thesis
During the first quarter of 2020, small-cap stocks - measured by the Russell 2000 index - posted one of the worst quarter results ever with a decline of over 40%, while the S&P 500 dropped approximately 20%. Since mid-March, the Russell 2000 index has been recovering at a similar pace of the S&P 500, though it is still lagging for the year. Small companies in a weak financial position were not prepared to deal with a shut-down of economic activity, and as a consequence, many of them will not survive. However, small businesses with a strong balance sheet will be well-prepared to go through this crisis. Long-term investors have an opportunity to invest in these companies that will benefit from sustained, long-term economic growth, which is the base case for the US economy.
One of these small companies is Miller Industries (NYSE:MLR), which has been growing its revenue and net income at an average rate of 10.7% and 21.3% respectively over the past 5 years. However, the company, currently, trades at a P/E below 9. There are many mature and low growth businesses trading at a higher valuation. Although its revenue and net income will contract in 2020 due to the impact of the coronavirus crisis, investors are being overly pessimistic about Miller's outlook. Moreover, whether the company is involved in a boring business or due to its small size, Miller Industries stock is being overlooked by investors despite its consistent performance and robust balance sheet.
Activity and description of the company
Miller Industries describes itself as the world's largest manufacturer of towing and recovery equipment. The company, founded in 1990, manufactures and sells wreckers, car carriers and transport trailers under ten separate brand names. Miller has four manufacturing facilities located in the US and two in Europe - more precisely in France and in
