Miller Industries Was Once A Sexy Pick In The 1990s - Now, It Has Steady Growth And A Moat

Summary

• Miller Industries' competitive moat is built by its distributor network and its strong brands.
• Its investment in new products has grown sales historically. I appreciate that it doesn't rely on acquisitions. It innovates on its own.
• This is a family-led business where the founder still has skin in the game.
• The company has a high cash position and no long-term debt. I expect a dividend hike this year.
• The stock has a low valuation if it recovers its cyclical decline last year. The U.S. government's infrastructure plan can act as a positive catalyst for the stock.

Company Description

Miller Industries (NYSE:MLR) is the world's largest towing and recovery equipment company with sales globally. They manufacture wreckers, car carriers, and vehicle transport trailers. The bodies of the wreckers and car carriers are installed on truck chassis which are made by 3rd parties. They purchase the chassis from 3rd parties, install their manufactured bodies, and then sell them to customers through a distributor network.

Wreckers recover and tow disabled vehicles. Car carriers are flat-bed vehicles with hydraulic tilt mechanisms that allow towing operators to drive or winch a vehicle onto the bed for transport. Finally, transport trailers are multi-deck vehicle transporters that move multiple vehicles at once. They have hydraulic ramps for loading vehicles.

Thesis: Strong Brands, Innovation Drives Growth, & Distributor Moat

Miller Industries cobbled together the top towing and recovery equipment brands in the 1990s. It has since invested in innovation which has produced double-digit compound annual sales growth. The company has a dominant market share position. Its brand recognition combined with its innovation inspires its customers and distributors to pay their way to see showings of its new products. That's a strong customer loyalty signal.

Its appeal is Apple-like. It generates a lot of social media buzz because the showings are a spectacle. Most viewers aren't purchasing wreckers, but it's certainly not a bad thing for thousands to be in awe of what the company unveils. It must inspire employees to work to their best ability.

The firm's independent distributors don't have exclusivity agreements, but 85% of distributors do not offer products of any other towing and recovery equipment manufacturer. That shows brand loyalty. Its distributor network is a competitive advantage/moat.

A Wild Company History (Lessons For Today)

Taking a few minutes to review the history of Miller Industries helps understand where it is now. Investors

Analyst’s Disclosure:I am/we are long MLR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.