Over the past 30 years, the U.S. has shifted away from being a country that focused on making tangible things to a financial innovator. And with such innovation came a rapid increase in debt from both the corporate and consumer sectors. For years, the economy expanded strongly and investors were blessed with the bull market that began in 1982.
Unfortunately, the party came to an abrupt and painful end last year. Decades of making paper instead of things has taken the U.S. away from a manufacturing based economy.
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Boring is Good
Now is a great time to focus on the boring old companies of yesteryear. For years, the fast and consistent growers were the financial powerhouses. While entrenched companies like Goldman Sachs (NYSE:GS) and Wells Fargo (NYSE:WFC) will likely continue to do well over the years, the "boring" businesses look attractive.
As both consumers and companies focus on the basics, companies that have remained depressed may be worth a look.
The Nuts and Bolts of It All
Trinity Industries (NYSE:TRN) makes things for the energy, transportation, and industrial sectors in the U.S. It sells railcars and rail parts, concrete, storage tank containers and wind towers. At $17, the company trades for less than half of sales and 75% of book value. It's a well managed company, and demand for its products should improve as the economy rebounds.
Tractor Supply (Nasdaq:TSCO) is retailer of farm and ranch stores in the U.S., founded in 1938, currently with around 900 locations. The company is to the farmer/rancher what the Home Depot (NYSE:HD) is to homeowners and contractors.
I'm a big fan of agriculture and farming over the next decade. We need more food to feed more people while the availability of arable land is declining. Further, more and more people are getting into farming and gardening as a way to save money.
Shares are fairly priced today, but a hiccup would be a wonderful opportunity to own a quality business with a great future. The company has no net debt, trades a 50% of sales and 7.5 times EBITDA.
Tangible Value
Sometimes innovation is not the key to profitable growth. Going forward, folks will always need asphalt, concrete, shovels, fencing and other good old fashioned products. Don't dismiss the value of a basic good. (For related reading, check out A Guide To Consumer Staples.)
