The consumer goods sector has been one of the least volatile sectors in 2013. This sector, contrary to popular belief, is not just made up of defensive stocks that represent laid back companies. Many companies in this sector have seen attractive upswings in their prices in recent months. Among these companies, I was particularly interested in exploring Harman International Industries (HAR), Icahn Enterprises (IEP -0.70%) and Oshkosh Corporation (OSK -0.80%) further.
Harman's leading edge business
Harman is a well-reputed name when it comes to audio and multimedia hardware. The company produces an array of premium products under the brand names of JBL, AKG, Infinity, etc. The company has penetrated the market for sound systems and studio equipment quite thoroughly. People following the company would know that its quarterly earnings have been slowing down; but that doesn't means that this trend will continue in the future. This company has enough potential going forward to change the current trend.
Harman is becoming the standard choice for car audio systems--the company's record high $20 million backlog of awarded business is a clear testament to this fact. This means that automakers around the world are becoming more and more confident in Harman's strategy to address the evolving needs of the public. The company's strategy is backed by a strong innovation pipeline that has been responsible for some of its earlier breakthroughs.
The company's financial position is quite stable. It has $434 million in cash on the balance sheet, with only $294 million in debt liabilities. As a matter of fact, the company's liquidity position allowed it to double its quarterly dividends. The company's revenue profile shows that up to 38% of its sales come from the heart of automobile manufacturing, Germany. The more I explore this company, the more I am convinced of its ability to grow further.
Great diversity in one package
Icahn is one of the most diversified companies out there. The company engages in gaming, railcar, automotive, metals, real estate and home fashion businesses. The company also has a strong investment business that provides investment advisory and back office services to other companies. Over the years, Icahn's business model has allowed it to invest in growing businesses. I believe this is the reason why the company has grown by an unbelievable 1,003% over the last 13 years--that's a whopping 20% annualized return for the lucky people who bought the stock way back in 2000.
The company's experienced team is led by the legendary investor Carl Icahn. Mr. Icahn believes that an activist strategy will drive growth in the coming years. This is because corporate balance sheets are rife with cash and credit markets are willing to provide cheap loans. Activism will drive M&A and consolidation of companies and this will, from the company's perspective, unlock value for shareholders. I believe this argument has substance because other industries are following the same trend. Take, for example, the packaged meat products industry. The industry used to have a lot of participants, but now it is made up of four large companies that have slowly grown through acquisitions.
At present, Mr. Icahn has been involved in a bidding war over Dell. People perceive that his involvement in this whole saga will benefit the stakeholders involved. Icahn Enterprises has stakes in other public companies, such as Netflix, Chesapeake and Transocean, and it owns a variety of private companies too.
On top of its impressive capital gains, the company increased its yearly distribution policy to $5 per depository unit. With its proven track record and a sensible activist strategy going forward, I believe the company is a must-have for your portfolio.
Making profits through specialty vehicles
Oshkosh is involved in the production of specialty vehicles and vehicle bodies. The company operates through its access equipment segment, defense segment, fire and emergency segment and commercial segment. Oshkosh's 2Q13 results were very impressive, as its EPS figures increased by more than 100% on a YoY basis and by 70% on a QoQ basis.
Oshkosh produces industry-leading brands. The access equipment segment produces a wide range of lifting vehicles. This segment is showing growth because of the recovery in the housing industry. U.S. housing starts have increased by almost 10.4% in comparison to last year's figures. An increase in construction activities means that North American rental companies are refreshing their fleets and driving the sales of this segment.
Oshkosh's defense segment has designed the L-ATV vehicle. The prototypes of this vehicle will undergo several tests by the end of 2013. If successful, the company expects to acquire contracts from the Pentagon as early as 2015. The commercial segment, which produces different types of loaders, mixers and cranes, is also set to benefit from the modest recovery in the housing and construction markets. All in all, the company is a solid package.
Final word
Harman and Icahn have great potential going forward. Both of the companies have significant advantages based on unique products and smart management teams. I would advise investors to explore each company further and take a long position as soon as they understand the inherent value in these stocks.
