Declining markets, like the one we’re in, are rough for everyone. But there are certain investing styles that are less shaken by market weakness. Ingrid Hendershot’sHendershot Investments follows one such system, modeled on Warren Buffett’s. In their own words, they “invest in high-quality, well-managed companies at reasonable valuations and hold them for the long term.” Today’s Daily Alert features their newest recommendation, a conservative, dividend-paying stock trading at 52-week lows that could be an appropriate buy here for patient, long-term investors.
“C.H. Robinson Worldwide, Inc. (CHRW) is one of the largest third-party logistics companies in the world, with 2011 total revenues topping the $10 billion milestone. Transportation services represented 88% of the company’s 2011 net revenues with Payment Services for motor carrier companies and fuel distributors making up 4% of net revenues.
“CHRW has contractual relationships with approximately 53,000 transportation companies, including motor carriers, railroads, air freight and ocean carriers. ... CHRW’s proprietary global supply chain technology and economies of scale provide distinct competitive advantages, which drive efficiencies and create service and cost advantages for its customers.
Steady Track Record
“C.H. Robinson has generated a track record of strong and steady performance in all types of market environments. Over the past 20 years, the company’s net revenues have compounded at a 16% annual rate, with operating income and EPS growing even faster, at 20% and 21% annual rates, respectively. The management team’s long-term compounded annual growth target is 15% for net revenues, operating income and EPS, recognizing that volatile industry conditions may curtail growth over shorter periods. While C.H. Robinson is a market leader, they only occupy a fraction of the large and fragmented global logistics market, which provides significant future growth opportunities as they capture market share, add new services and expand their global network.
Debt-Free Balance Sheet
“C.H. Robinson maintains a strong, debt-free balance sheet. This is another competitive advantage as companies want to work with financially and operationally strong providers. The company has historically generated substantial cash from operations. Free cash flow has compounded at a 15% annual rate over the last decade to nearly $377 million in 2011. During the 2012 first quarter, free cash flow motored 47% higher to more than $63 million.
“With relatively minimal capital expenditure needs, management redeploys growing cash into strategic acquisitions and returns significant cash to shareholders via dividends and share repurchases, totaling $1.2 billion over the last three years. The latest dividend increase was 14% to an annual rate of $1.32 per share, representing a solid 2.2% yield.
High Return on Equity
“C.H. Robinson’s business generates high returns on equity, which have averaged more than 30% annually over the past five years. The company’s variable cost business model enables them to stay very efficient internally while maintaining industry-leading profitability.
“Long-term investors should hop aboard C.H. Robinson Worldwide, a HI-quality market leader with steady growth, a debt-free balance sheet and high profitability. Buy.”
- Ingrid R. Hendershot, CFA, Hendershot Investments, June 2012