Brad Evans
Heartland Value Plus
Ticker: (AIN)
Small and large pick: Small-caps
Brad Evans loves stocks that others hate. That approach has propelled Heartland Value Plus (HRVIX) to annualized 5.8% returns over the past five years, beating 95% of its competitors. Albany International is a classic Evans choice. The company used to be a mini-conglomerate, selling everything from industrial doors to fake down. Now it's got two key units: a lucrative (but flat) business in fabrics and belts used to make paper, and a line that produces engineered composites, which are lightweight and save fuel, mostly for aerospace and defense. Already providing fan blades for the LEAP engine, used on new planes from Boeing and Airbus, this unit could take off, in Evans's view. It represents only $60 million in sales, vs. nearly $700 million for the paper operations, but Evans argues that composites could be a $300 million to $500 million operation (with 20% operating margins) by 2020. The stock has a forward P/E of 13.5 and a yield of 2.6%. "The market is valuing the company as a no-growth paper machine clothing company, and it is very attractively valued on just that metric," Evans says. Add in the composites business, he argues, and Albany is "misunderstood, underloved, and underfollowed."
--A.F.
Beware of munis priced at bubble levels. They'll always pop in the end.
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