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The searing guitar sound wails as the piercing lead notes of “Let’s Get it Up” by AC/DC rock the walls of the dusty basement gym. Through the hissing special- effects fog walk 2 amazing human specimens, Titan Alpha and Titan Omega, as they prepare for their workout. A legion of their loyal fans sit with mouth agape, having paid their $1.00 admission fee to witness the spectacle of the Titans hoisting quantities of steel that would be more suitable for an industrial forklift.
One first time wide-eyed spectator whispers to a nearby fan who is donning a “Titans” T-shirt. He asks, “How on earth do they do it??” The wiser, but still no less impressed fan explains very simply:
“Their elbows are hinges, their arms machines”
Indeed, it must be as if a hydraulic system is somehow at work, as the free weights defy gravity with each and every repetition. But no, it is simply the Titans living what other mere mortals dream. However it is the whim of these mere mortals which compels them to try to replicate what the Titans have done. Inspired to be like the Titans, the world’s best engineers, with pipe cleaners for arms, have used their pencils and drafting boards to create hydraulic systems that can lift almost as much weight as the Titans do.
Fluid power (hydraulics and pneumatics) involves the transfer and control of power through fluids or air under pressure. Fluid power systems are integral to a wide variety of manufacturing, material handling, agricultural and construction equipment. Reflecting its mechanical advantage, fluid power is widely employed to move and position materials, control machines, vehicles and equipment, and improve industrial efficiency and productivity. Not quite with the pinache of the Titans, but maybe as effective.
Today I bought Sun Hydraulics (SNHY) at 41.28. I will sell it in 4 – 6 weeks at 47.55. Here’s why I like Sun Hydraulics:
SNHY stock is up over 158% in the last 12 months yet its PE is only 29. The better news is that its 12 month forward PE is as low as 18.
Here is the one year chart for SNHY:
Sun Hydraulics products, screw-in hydraulic cartridge valves, manifolds and
packaged systems, are used by capital goods manufactures to provide
control of a hydraulic system. Sun is the best at what they do. Their products offer exceptional reliability and Sun is the most recognized brand of high-performance hydraulic cartridge valves in the world. So buying SNHY stock means you are buying the best, at a low price.
SNHY is one of those great $$$MR. MARKET$$$ companies that has been flying under the radar for quite some time. They are very boring for sure, but all they do is make money.
• Profitable since 1972
• Dividend every quarter since going public – increased to $0.075 in Dec. 04.
• Sustainable growth
• Global presence
The company's order trend has historically tracked closely to the U.S. Purchasing Managers Index (PMI). The index was 55.2 at March 31, 2005, versus 62.5 a year earlier. When PMI is over 50, it indicates economic expansion.
Management is incredibly focused on profitability. As their track record would indicate, this company isn’t about egotistical CEO’s cooking the books so they can buy a brand new Gulfstream Jet to scoot over to the south of France to ogle bare bosoms. These guys want to make great hydraulic valves and make their customers, and shareholders, happy. In December last year, they raised their quarterly dividend 50%, from five cents to seven and one half cents per share. This shows $$$MR. MARKET$$$ that management is very confident about their prospects.
Sun is a global company, with operations in the United States, the UK,
Germany, France, Korea and China. The markets for hydraulic products are evenly divided between the Americas, Europe and Asia/Pacific. This global platform ideally positions Sun to meet the demands of our customers. In addition, this global presence diversifies Sun against any local weakness in any one economy.
The hydraulic industry itself is $25 billion dollars. Of the $25 billion dollars, roughly $3.5 billion dollars is related to the production of hydraulic valves. Specifically, Sun competes in the screw-in cartridge and manifold segment, which is about 30% of the total valve market. About 80% of its revenue comes from screw-in cartridge valves, which control the flow of liquids that drive fluid motors. The rest comes from manifolds, which connect the valves.
Here is a picture of the little buggers:
Sun is betting that the cartridge valves industry will continue to take a greater share of the overall $3.5 billion dollar valve industry because these
products:
•Are a superior technology that offers performance and commercial
advantages,
•Are smaller and easier to design in and install,
•Provide significant manufacturing advantages to the customer,
•Cost less, and
•Are easily serviced.
Screw-in cartridge valves perform all of the same functions as conventional
valves but often provide a more economical, design friendly solution. Cartridge valves reduce the size and weight of the hydraulic system. With cartridges, mechanics can un-screw valves from manifolds and replace them separately, cutting labor costs. In such industries as manufacturing, in which many production lines depend on hydraulics-driven robots, less money is lost on idle machines.
Like the Apple Ipod replacing CD’s, these screw-ins could actually someday replace the conventional valves making a bonzo opportunity for Sun to capitalize on. The company believes the innovative floating construction of its screw-in cartridge valves provides demonstrable performance and reliability advantages compared with other available screw-in cartridge valves. Screw-in cartridge valves are an increasingly accepted alternative to conventional forms of hydraulic valving, offering significant design flexibility, as well as substantial size, weight and efficiency benefits afforded to designers of fluid power systems. Current computer technology provides the means (CNC & 3D computer design tools) to be able to make new screw-in hydraulic cartridge products that are much smaller, much smarter, more reliable, on all account much better, safer and cheaper to use.
The ability of Sun’s products to withstand the rigors of industrial applications differentiates Sun from most other cartridge valve companies. Customers making the conversion will look to Sun first because they’ll be all nervous the first time they move away from the conventional valves.
“Joe, I told you these screw-in valves would never work! We should have stayed with the conventional valves! Did you get those screw-in valves from Sun???”
“No.”
“Why not??”
“The guy from the other company had Tampa Bay Devil Rays tickets.”
“Joe….YOU’RE FIRED!”
Indeed, where Sun does really well is in instances where you just cannot afford a screw up such as in platforms that raise workers into the air or luggage into airliners.
The company's reliability comes from its unique design. Screw-in valves can work themselves loose in high-pressure, high-vibration environments. But with Sun, the design allows mechanics to tighten the valve absolutely tight without impacting the performance of the valve.
As older equipment that used conventional valves is replaced, the new equipment being built will be more Sun-friendly, opening up even more sales growth opportunities for Sun.
True, customers pay about 10% more for Sun products, but it sure beats getting FIRED. If Joe was thinking straight, he’d realize that he could have bought the Sun Cartridges and then vacationed in Sarasota, FL and called it a business trip.
While Sun sells predominantly through independent distributors, their remote
operations often deal directly with customers in addition to supporting local
distributors. The combination of direct factory support and technically
capable distribution is the sales route that delivers the highest value to
Sun’s customers and shareholders. Sun has long term relationships with the finest distribution partners in the fluid power industry. This will make it tougher for any new yahoos to get in on the good stuff when it happens.
Sun’s operational focus will continue to increase productivity and production capacity. This organic growth means that Sun’s earnings have quality, and are not related to any short term perishable event or phenomenon.
Now that I mention earnings. What about earnings? Remember the mantra …earnings earnings earnings. The company's strong free cash flow, focus on hydraulics, and high level of insider ownership are what makes you think the earnings will stay.
Sun has seen their revenues grow over 50% in the 3 yr period 2002 – 2004. Commensurate with this revenue growth has been some spectacular earnings growth…over 300%!
Net sales in the three months ended April 2, 2005, rose 36%, year to year, primarily reflecting the positive effect of an economic recovery within the manufacturing sector, particularly in North America; sales in the U.S., U.K., Germany and Korea were up 40%, 32%, 36% and 16%, respectively. Gross margins widened, on price increases and productivity improvements; with well controlled SG&A expenses, operating profit grew to $5.5 million, from $2.2 million.
In 2003, SNHY earned $0.33/share on revenues of $71 million. In 2004, SNHY earned $1.14/share on revenues of $95 million. The only ANAL-yst who is covering SNHY seems to think that the company will earn $1.75/share for 2005 on revenues of $115 million. Well, at least he’s smart enough to know that earnings are going to exceed last year. But what a wimp prediction! That’s like leaving a 4 foot putt short.
What Mr. ANAL-yst does not know, that $$$MR. MARKET$$$ does know is that SNHY will earn $1.92/share on revenues of $129 million. At today’s PE of 29, that translates to a stock price of $55.68, well past my sale target. Quarterly earnings are expected in early August.
SNHY’s balance sheet has never been healthier. Long term debt is down to 18%, from over 30% last year. Also performance metrics are very solid. Return on Assets is 11.6% while Return on Equity is 19.5%.
Don’t forget the almost 1% dividend and lucky me got in right before tomorrow’s 3:2 stock split.
How can I not buy stock in a company whose headquarters is in Sarasota, FL. Do you know what famous person is from Sarasota, FL? Ooooooh yea…:
While Allen Carlson, CEO of Sun Hydraulics, may not be able to execute a twisting flying elbow drop from the top turnbuckle, he does have some impressive things to say:
"2004 was an excellent year for Sun in all respects and 2005 is shaping up to be better than last year. Orders continue to be strong and demand is up in all of our markets.
"Orders for the first quarter of 2005 were $30.8 million, a 25% increase over the first quarter last year," Carlson added. "April orders were $10.1 million, a 23% increase over last year. We believe second quarter sales will be higher than the first, despite fewer shipping days, and we expect to maintain our on-time delivery performance."
In conclusion, Carlson stated, "I believe Sun's strong financial condition and long term success are largely due to our philosophy of maintaining 'balance' in our business, both externally and internally. As stated in our just released 2004 annual report, balancing the interests of our customers, shareholders, employees, distributors and suppliers will remain at the heart of our efforts."
"I believe our most important achievement in 2004 was our ability to maintain and improve our on-time delivery, even with a 33% increase in sales. This capability will help Sun to continue to grow in all of our markets, both short-term and long-term.
"The rebound in domestic markets was very strong in 2004, and remains strong in January and February," Carlson continued. "Along with a 39% North American sales increase compared to 2003, our international business has remained strong, with European sales increasing 25% and Asian sales increasing 28%."
Carlson added, "While the 33% increase in sales had a positive effect on margins, we were also able to offset the effect of material cost increases and further improve margins through higher productivity. This enabled us to hold the line on pricing. As a result, I believe we have gained market share." Gross profit in 2004 increased 54% over 2003. Gross profit as a percentage of sales increased to 30% from 26% in 2003.
"In 2005, we will continue to invest in marketing and productivity improvements at a level comparable to 2004," Carlson concluded.
Sun Hydraulics' founder owns 36% of the company's shares.
Clyde G. Nixon is Chairman of Sun Hydraulics Corp He served as President of Sun Hydraulics from 1988 - 2000, before becoming Chairman. "The board of directors believes the stock dividend will help improve shareholder value by increasing the marketability and liquidity of Sun's stock," Sun Chairman Clyde Nixon said in a statement.
I have always liked people named Clyde. Nixon received a mechanical engineering degree from Cornell University and an MBA from Harvard, and served in the U.S. Navy as an engineering officer. This guy might even be smarter than me, but he’ll need to use hydraulics to match my 385 lb bench press.
I am HUGE!!
$$$MR. MARKET$$$
So...what did you think of my write-up? Would you like to see more like this? Tell a friend about www.mrmarketishuge.com
One first time wide-eyed spectator whispers to a nearby fan who is donning a “Titans” T-shirt. He asks, “How on earth do they do it??” The wiser, but still no less impressed fan explains very simply:
“Their elbows are hinges, their arms machines”
Indeed, it must be as if a hydraulic system is somehow at work, as the free weights defy gravity with each and every repetition. But no, it is simply the Titans living what other mere mortals dream. However it is the whim of these mere mortals which compels them to try to replicate what the Titans have done. Inspired to be like the Titans, the world’s best engineers, with pipe cleaners for arms, have used their pencils and drafting boards to create hydraulic systems that can lift almost as much weight as the Titans do.
Fluid power (hydraulics and pneumatics) involves the transfer and control of power through fluids or air under pressure. Fluid power systems are integral to a wide variety of manufacturing, material handling, agricultural and construction equipment. Reflecting its mechanical advantage, fluid power is widely employed to move and position materials, control machines, vehicles and equipment, and improve industrial efficiency and productivity. Not quite with the pinache of the Titans, but maybe as effective.
Today I bought Sun Hydraulics (SNHY) at 41.28. I will sell it in 4 – 6 weeks at 47.55. Here’s why I like Sun Hydraulics:
SNHY stock is up over 158% in the last 12 months yet its PE is only 29. The better news is that its 12 month forward PE is as low as 18.
Here is the one year chart for SNHY:
Sun Hydraulics products, screw-in hydraulic cartridge valves, manifolds and
packaged systems, are used by capital goods manufactures to provide
control of a hydraulic system. Sun is the best at what they do. Their products offer exceptional reliability and Sun is the most recognized brand of high-performance hydraulic cartridge valves in the world. So buying SNHY stock means you are buying the best, at a low price.
SNHY is one of those great $$$MR. MARKET$$$ companies that has been flying under the radar for quite some time. They are very boring for sure, but all they do is make money.
• Profitable since 1972
• Dividend every quarter since going public – increased to $0.075 in Dec. 04.
• Sustainable growth
• Global presence
The company's order trend has historically tracked closely to the U.S. Purchasing Managers Index (PMI). The index was 55.2 at March 31, 2005, versus 62.5 a year earlier. When PMI is over 50, it indicates economic expansion.
Management is incredibly focused on profitability. As their track record would indicate, this company isn’t about egotistical CEO’s cooking the books so they can buy a brand new Gulfstream Jet to scoot over to the south of France to ogle bare bosoms. These guys want to make great hydraulic valves and make their customers, and shareholders, happy. In December last year, they raised their quarterly dividend 50%, from five cents to seven and one half cents per share. This shows $$$MR. MARKET$$$ that management is very confident about their prospects.
Sun is a global company, with operations in the United States, the UK,
Germany, France, Korea and China. The markets for hydraulic products are evenly divided between the Americas, Europe and Asia/Pacific. This global platform ideally positions Sun to meet the demands of our customers. In addition, this global presence diversifies Sun against any local weakness in any one economy.
The hydraulic industry itself is $25 billion dollars. Of the $25 billion dollars, roughly $3.5 billion dollars is related to the production of hydraulic valves. Specifically, Sun competes in the screw-in cartridge and manifold segment, which is about 30% of the total valve market. About 80% of its revenue comes from screw-in cartridge valves, which control the flow of liquids that drive fluid motors. The rest comes from manifolds, which connect the valves.
Here is a picture of the little buggers:
Sun is betting that the cartridge valves industry will continue to take a greater share of the overall $3.5 billion dollar valve industry because these
products:
•Are a superior technology that offers performance and commercial
advantages,
•Are smaller and easier to design in and install,
•Provide significant manufacturing advantages to the customer,
•Cost less, and
•Are easily serviced.
Screw-in cartridge valves perform all of the same functions as conventional
valves but often provide a more economical, design friendly solution. Cartridge valves reduce the size and weight of the hydraulic system. With cartridges, mechanics can un-screw valves from manifolds and replace them separately, cutting labor costs. In such industries as manufacturing, in which many production lines depend on hydraulics-driven robots, less money is lost on idle machines.
Like the Apple Ipod replacing CD’s, these screw-ins could actually someday replace the conventional valves making a bonzo opportunity for Sun to capitalize on. The company believes the innovative floating construction of its screw-in cartridge valves provides demonstrable performance and reliability advantages compared with other available screw-in cartridge valves. Screw-in cartridge valves are an increasingly accepted alternative to conventional forms of hydraulic valving, offering significant design flexibility, as well as substantial size, weight and efficiency benefits afforded to designers of fluid power systems. Current computer technology provides the means (CNC & 3D computer design tools) to be able to make new screw-in hydraulic cartridge products that are much smaller, much smarter, more reliable, on all account much better, safer and cheaper to use.
The ability of Sun’s products to withstand the rigors of industrial applications differentiates Sun from most other cartridge valve companies. Customers making the conversion will look to Sun first because they’ll be all nervous the first time they move away from the conventional valves.
“Joe, I told you these screw-in valves would never work! We should have stayed with the conventional valves! Did you get those screw-in valves from Sun???”
“No.”
“Why not??”
“The guy from the other company had Tampa Bay Devil Rays tickets.”
“Joe….YOU’RE FIRED!”
Indeed, where Sun does really well is in instances where you just cannot afford a screw up such as in platforms that raise workers into the air or luggage into airliners.
The company's reliability comes from its unique design. Screw-in valves can work themselves loose in high-pressure, high-vibration environments. But with Sun, the design allows mechanics to tighten the valve absolutely tight without impacting the performance of the valve.
As older equipment that used conventional valves is replaced, the new equipment being built will be more Sun-friendly, opening up even more sales growth opportunities for Sun.
True, customers pay about 10% more for Sun products, but it sure beats getting FIRED. If Joe was thinking straight, he’d realize that he could have bought the Sun Cartridges and then vacationed in Sarasota, FL and called it a business trip.
While Sun sells predominantly through independent distributors, their remote
operations often deal directly with customers in addition to supporting local
distributors. The combination of direct factory support and technically
capable distribution is the sales route that delivers the highest value to
Sun’s customers and shareholders. Sun has long term relationships with the finest distribution partners in the fluid power industry. This will make it tougher for any new yahoos to get in on the good stuff when it happens.
Sun’s operational focus will continue to increase productivity and production capacity. This organic growth means that Sun’s earnings have quality, and are not related to any short term perishable event or phenomenon.
Now that I mention earnings. What about earnings? Remember the mantra …earnings earnings earnings. The company's strong free cash flow, focus on hydraulics, and high level of insider ownership are what makes you think the earnings will stay.
Sun has seen their revenues grow over 50% in the 3 yr period 2002 – 2004. Commensurate with this revenue growth has been some spectacular earnings growth…over 300%!
Net sales in the three months ended April 2, 2005, rose 36%, year to year, primarily reflecting the positive effect of an economic recovery within the manufacturing sector, particularly in North America; sales in the U.S., U.K., Germany and Korea were up 40%, 32%, 36% and 16%, respectively. Gross margins widened, on price increases and productivity improvements; with well controlled SG&A expenses, operating profit grew to $5.5 million, from $2.2 million.
In 2003, SNHY earned $0.33/share on revenues of $71 million. In 2004, SNHY earned $1.14/share on revenues of $95 million. The only ANAL-yst who is covering SNHY seems to think that the company will earn $1.75/share for 2005 on revenues of $115 million. Well, at least he’s smart enough to know that earnings are going to exceed last year. But what a wimp prediction! That’s like leaving a 4 foot putt short.
What Mr. ANAL-yst does not know, that $$$MR. MARKET$$$ does know is that SNHY will earn $1.92/share on revenues of $129 million. At today’s PE of 29, that translates to a stock price of $55.68, well past my sale target. Quarterly earnings are expected in early August.
SNHY’s balance sheet has never been healthier. Long term debt is down to 18%, from over 30% last year. Also performance metrics are very solid. Return on Assets is 11.6% while Return on Equity is 19.5%.
Don’t forget the almost 1% dividend and lucky me got in right before tomorrow’s 3:2 stock split.
How can I not buy stock in a company whose headquarters is in Sarasota, FL. Do you know what famous person is from Sarasota, FL? Ooooooh yea…:
While Allen Carlson, CEO of Sun Hydraulics, may not be able to execute a twisting flying elbow drop from the top turnbuckle, he does have some impressive things to say:
"2004 was an excellent year for Sun in all respects and 2005 is shaping up to be better than last year. Orders continue to be strong and demand is up in all of our markets.
"Orders for the first quarter of 2005 were $30.8 million, a 25% increase over the first quarter last year," Carlson added. "April orders were $10.1 million, a 23% increase over last year. We believe second quarter sales will be higher than the first, despite fewer shipping days, and we expect to maintain our on-time delivery performance."
In conclusion, Carlson stated, "I believe Sun's strong financial condition and long term success are largely due to our philosophy of maintaining 'balance' in our business, both externally and internally. As stated in our just released 2004 annual report, balancing the interests of our customers, shareholders, employees, distributors and suppliers will remain at the heart of our efforts."
"I believe our most important achievement in 2004 was our ability to maintain and improve our on-time delivery, even with a 33% increase in sales. This capability will help Sun to continue to grow in all of our markets, both short-term and long-term.
"The rebound in domestic markets was very strong in 2004, and remains strong in January and February," Carlson continued. "Along with a 39% North American sales increase compared to 2003, our international business has remained strong, with European sales increasing 25% and Asian sales increasing 28%."
Carlson added, "While the 33% increase in sales had a positive effect on margins, we were also able to offset the effect of material cost increases and further improve margins through higher productivity. This enabled us to hold the line on pricing. As a result, I believe we have gained market share." Gross profit in 2004 increased 54% over 2003. Gross profit as a percentage of sales increased to 30% from 26% in 2003.
"In 2005, we will continue to invest in marketing and productivity improvements at a level comparable to 2004," Carlson concluded.
Sun Hydraulics' founder owns 36% of the company's shares.
Clyde G. Nixon is Chairman of Sun Hydraulics Corp He served as President of Sun Hydraulics from 1988 - 2000, before becoming Chairman. "The board of directors believes the stock dividend will help improve shareholder value by increasing the marketability and liquidity of Sun's stock," Sun Chairman Clyde Nixon said in a statement.
I have always liked people named Clyde. Nixon received a mechanical engineering degree from Cornell University and an MBA from Harvard, and served in the U.S. Navy as an engineering officer. This guy might even be smarter than me, but he’ll need to use hydraulics to match my 385 lb bench press.
I am HUGE!!
$$$MR. MARKET$$$
So...what did you think of my write-up? Would you like to see more like this? Tell a friend about www.mrmarketishuge.com
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