Oftentimes, shares of companies that no one knows about turn out to be terrific investments. In my search for the unloved, I like to focus on unsexy businesses that operate in an industry that has been beaten down and for a company that has a competent management team with a strategic plan.
One stock that I’ve had my eye on is Casey’s General Stores, Inc. (CASY). The company operates more than 1,400 convenience stores that sell everything from gas to beverages to tobacco products and quite a few things in between.
Despite a difficult retail environment, CASY just reported recorded earnings of $1.68 per share. No, it’s not a high growth business and macro-economic factors have much to do with Casey’s fortunes. Simply put: CASY is a well-run business that is prospering in times of economic uncertainty, stagnant retail sales and high gas prices.
A Loyal Following
If Sam Walton were alive today, he surely would be running a Casey’s! (See, “World Take-Over By Wal-Mart and Costco.“) The chain has a long-standing policy of pricing gasoline with the local competition (namely 7-Eleven and Kwik Trip stores) which has resulted in customer loyalty over the years.
While customers have been buying fewer gallons of gas per visit, sales of Casey’s grocery, prepared foods and fountain drinks are showing solid growth.
Last week, CASY Management raised the dividend by 15% and reported a quarterly profit of 28 cents per shares, 18% more than Wall Street analysts expected. But despite record earnings, CASY shares trade only slightly above their 52-week lows, making it an attractive buy.
CASY is continuing to seek to buy attractive properties at reasonable prices, but fell short of its goal to acquire 50 stores due to inflated seller expectations. I find it refreshing to see management’s fiscal restraint by not overpaying for acquisitions. As long as Casey’s doesn’t take on additional debt, the chain should be able to continue posting strong growth figures. After all, they have a lot of room to expand.
Forget about the banks and the homebuilders, they’re going to be in rough shape for a long time! You need to focus on the great secular growth areas where investors can make some nice profits in ’08. Retail stock are it! Want in? Just sign up for your 90-day, risk-free trial subscription to ChangeWave Investing!
