Wrapping up their show, the Motley Fool Money team talks about the companies they have their eyes on going forward. Tune in to learn more.
A full transcript follows the video.
This podcast was recorded on March 17, 2017.
Chris Hill: Let's get to the stocks on our radar. We'll bring in our man Steve Broido in from the other side of the glass to hit you with a question. Ron Gross, you're up first -- what are you looking at?
Ron Gross: I'm going with Ecolab, ECL. It's a recent Best Buy Now here at The Motley Fool. They provide cleaning, sanitation, and other specialty chemical products and services for the hospitality, food-service, and healthcare markets. And I like my hospitality and food-service establishments clean. I hope you do, too. High recurring revenues, relatively low risk profile, raises its dividend every year for the past six. Stock looks relatively undervalued.
Hill: Steve, question about Ecolab?
Steve Broido: Don't most companies just do that naturally on their own? Do they need to hire someone?
Gross: Big industrial places, big hotels, you need to outsource that kind of thing.
Hill: Andy Cross, what's on your radar?
Andy Cross: Same vein, from Stock Advisor, Cintas, which is the largest uniform provider, and also provides cleaning supplies and safety equipment to almost a million different businesses in the U.S., just last year announced their $2.2 billion acquisition of a competitor of theirs. The stock is up three times in value in the last five years. It generates a ton of cash. But the asset base is actually flat over that time period, so they're just very effective at doing more with less, or with the same amount. I like the stock here, and I think it's going to do well, and I'm looking to see what they talk about with this acquisition.
Hill: The ticker symbol?
Cross: CTAS. Cintas.
Hill: Steve, question about Cintas?
Broido: Does Cintas' uniforms, is this a laundering business? Is that repeat business? I wear the thing, it has to go back to get cleaned, and then back to me?
Cross: Oh, yeah, hospitality is one of their biggest markets. So yeah, you'd wear the uniform, dirty it all up, and send it back.
Hill: Seth Jayson, what are you looking at?
Seth Jayson: I was going to see if I could be even more boring than those two stocks.
Gross: How dare you.
Jayson: Dorman Products.
Gross: You win.
Jayson: Do I win? They make replacement parts for fixing your car. For the most part, they're sold to places like Advance Auto or O'Reilly. They're one of those sleepers. I recommended them a while ago to Hidden Gems. They were a best buy a few times. They seem to be not doing all that great, kind of forgot about them, I checked them out the other day and they were up 90% or something from the point of being picked. And I looked and the reason why is that, for several quarters, the retailers who stock their parts were going through a destocking process, and trying to lean out their operations, and that was a drag on sales for Dorman. And that has finally turned around. The shelves are empty, I guess.
Dorman is also doing a better job of changing its product mix. They're selling higher-value stuff, getting rid of the lower-value stuff. And some of these complex electronics modules that they're selling replacements for are even pricier. The stock is higher than it's been for a while, but I think, as vehicles get older, and they continue to get older, more people are going to have to fix them, they're going to sell more stuff. DORM is the ticker.
Broido: What makes me want to buy a Dorman product versus the generic thing off the shelf?
Jayson: You may not even know, but the generic thing off the shelf may actually be the Dorman product. But what happens is, you go to Advance Auto or one of the others and see what they have. The Dorman products tend to be, I think, better engineered than something you're going to get, a fly-by-night generic product out of China. But again, you're going to have to do some experimenting to find out which one you really want. I look at the Buffett thing. You don't pay a whole lot more to get a name you trust.
Broido: I'm going with Cintas.