Sunday, June 12, 2011

"The earnings keep rising at Quaker Chemical (KWR) of Conshohocken PA., year after year. I think it is time to take a position here in the stock."

Dow Jones Industrial Average 11,952 (Down)  - Is it 6 weeks now down?

Everybody is worrying about Quantitative Easing 2 ending. Who will buy our debt issued when it goes to auction if the government is not buying it. If no one wants it, will they need to raise the interest rates to get it moving? If interest rates rise, what will happen to the housing market and the recovery. Will the dollar rise in value? What ever will happen? Buddy can you spare a dime? Hope it doesn't go that badly.

Maybe Alfred E. Neuman from MAD magazine had it right in 1959 when he said " What me Worry?"
Alfred E Neuman
Neuman once answered a letter from a suicidal reader by giving him "expert advice" on the best technique for tying a hangman's knot. Such was the bantering of the irreverent Mad magazine and of course our childhood education on these matters.

But alas, around the world we will still need steel and steel tubing and the specialty chemicals that keep those grinding machines cool and running.

Quaker Chemcial , (Symbol KRW, $39.56)  is a company that focuses on just such an area of business. Quaker is a $544.1 million dollar company headquartered in Conshohocken, Pennsylvania, USA, with regional headquarter locations in Uithoorn, The Netherlands, Rio de Janeiro, Brazil and Shanghai, China. The company is publicly traded on the New York Stock Exchange, and has a long track record of financial consistency and strength. The principal industries they serve throughout the world are automotive, steel finishing, heavy equipment, aerospace, tube and pipe, and bearing manufacturing. They also serve other industries involved in making products from metal which require machining and grinding, rolling and forming, and associated cleaning and corrosion prevention processes.

I have been joking around with my company's distribution manager, who lives in Conshohocken, about buying this stock all the way back to when it was trading at $14.00 per share. Always wary of the "tip from a friend" purchase, I finally made a further analysis on this stock and bought it. Quaker trades currently at a PE ratio of 13.84 .  2011 earnings are projected at $3.30 per share and a forward PE of 12 and 2012 earnings are looking like $3.67 per share with a projected  PE of 10.78.  Add in a current dividend yield of 2.43% and you have a nice package poised for a reasonable return. Financials also look good with a Current ratio currently of 2.25.  There are only 11.5 Million shares outstanding so a small float, good for earnings building. 

The stock YTD is down 5%, but over one year it is up 47.39% , 3 year 34.28% and 5 year 119.66%. I can live with those kind of returns. This is a good way to play the high demand for steel products. 

So keep an eye on the VIX  (VOLATILITY S&P 500 index) to see when this downside volatility starts to subside and start buying in incrementally into stocks with good fundamentals and earnings like this one.

Keep your eye on the ball  ............                                    
                          .......and stay in the game.


No comments:

Post a Comment