4 High Flyers You’ve Never Heard Of
May 10, 2013, 4:04 pm
Have you ever heard the phrase, “the man behind the curtain?” I have, after seeing the movie several times over the years with my children. But what you might not know is how well that phrase can apply to investing.
You see, sometimes you find a store that you like, but it’s not investable. Why? Because another company, a much bigger company, is the one that owns it and is pulling the strings – the man behind the curtain, if you will.
This was something I started to think about the last time I was in LensCrafters. It’s a popular chain with tons of stores that do well, but did you know that this chain is actually owned by Luxottica Group Spa (LUX), the largest eyewear company in the world?
So I thought it would be fun to lift the curtain on four big companies that you may have never heard of but who impact many of our lives every day.
Luxottica Group Spa (LUX) is big. I mean really, really big. LUX is the world’s largest eyewear company, and with six production facilities in Italy, two in China and one each in the United States and Brazil, chances are the glasses you are buying were made by Luxottica.
LUX has a market cap of over $24 billion (and would be considered a large-cap stock) with over 65,000 employees. Their brands include Ray-Ban, Oakley, Persol, Oliver Peoples, and Revo. Luxottica also produces eyewear under license for designer labels like Coach, Polo Ralph Lauren, Chanel, Prada, Tory Burch, Tiffany, DKNY and many other well-known high-end brands.
The company also sells eyewear through over 7,100 retail outlets around the world. These include Sunglass Hut International, Pearle Vision, LensCrafters, Sears Optical, Target Optical, among many others. LUX even provides eye care services with EyeMed Vision Care, the U.S.’ second largest vision benefits company.
LUX reported strong results this past quarter. Revenues grew 4.2% and earnings jumped 21.8%. All global regions saw sales growth, with the company’s emerging markets region leading the way with 17% gains. The stock has also done well, up 50% in the last 12 months.
Cal-Maine Foods (CALM) is the largest U.S.-based producer and marketer of fresh shell eggs. The company produces, grades, packages, markets, and distributes eggs in 29 states and under brand names Egg-Land’s Best, Farmhouse, and 4-Grain brands.
CALM has a market cap of over $900 million and pays out a dividend yield of 2.9%. Sales growth the past five years has averaged 13.2% while earnings growth averaged 19.3%. Management believes that they can achieve long-term annual earnings growth of 10%. I’m interested in CALM’s next earnings report due in early August, as the quarter it covers (March-May) will include the Easter season, which is one of the company’s busiest.
Compass Minerals International (CMP) is a leader producer of various minerals including salt, sulfate of potash specialty fertilizer (SOP), and magnesium chloride. CMP produces and markets consumer deicing (39% of sales by applications) and water conditions products (16%), ingredients used in consumer and commercial food preparation (36%), and other mineral-based products used in consumer, agricultural, and industrial applications.
CMP had an excellent first quarter, with sales jumping 22% to $384 million driven by a 20% increase from the salt segment. The company also had improved cash flow from operations, up 33% from a year ago. Earnings increased 16% to $1.38 a share. I also liked that management increased the dividend by 10%, and the stock yields a solid 2.5%.
Parexel (PRXL) isn’t the parent company of better-known brands, but it plays a significant role in bringing new drugs to market. Parexel is one of the leaders in the game-changing industry of clinical research organizations (CRO). CROs might sound boring, but they are actually an interesting concept. Pharmaceutical and biotech companies outsource to these CROs the research and clinical trials necessary to help get a new drug or medical device approved by the Food and Drug Administration (FDA). They offer the resources and knowledge to move a drug or device through the approval process so the manufacturer doesn’t have to maintain a staff for these functions.
Parexel has a particular expertise in information technology, which has created high demand for its services. It is also one of the few top-tier providers with the necessary expertise and infrastructure to conduct large clinical trials around the world. PRXL’s work may take place behind the curtain, but it is critical to the drug and medical device approval process.
In the most recent quarter, PRXL beat both earnings and revenue expectations. EPS increased 52% to $0.50 versus $0.33 a year ago, and revenues jumped 10.31% to $454.49 million. PRXL also has a new acquisition, the Heron Group, under its belt, which will bolster the company’s commercialization capabilities.
Sometimes the big companies aren’t the ones right in front of you that hear about on a daily basis, they are the ones hiding in the back, going about their business quietly but never missing a beat. You may have to do some serious digging, but the reward is often worth the effort.