Tuesday, October 14, 2008
Mohawk Industries-A Positive Spin on A Negative Industry
The housing market has been in a downward cycle since topping out in 2005 and it is anyones guess when it will end. On a positive spin their have been plenty of housing related stocks that have been sold off hard. One in particular is Mohawk Industies Inc.$MHK. Mohawk is a leading producer and distributor of flooring worldwide that has a 125 year history. They sell to both residential and commercial markets which include ceramic tile, rugs, carpet, hardwood as well as laminate flooring. Through acquisitions and internal growth Mohawk has become one of the worlds largest floor covering suppliers and the country's leading recycler of plastic soda bottles(which become polyester carpeting). At the end of 2007 Mohawk and Shaw Industries(part of Warren Buffets Berkshire Hathaway conglomerate) controlled a combined 45% of the U.S. flooring market. Since only a handful of companies manufacture flooring this gives them high pricing power. Mohawks current price is $50 and trades at 5.5 times earnings with a Debt/Equity ratio .044, REO is 14% and a current book value of $73 share. Further management has a 19% stake and to boot Fairholme Capital and the Sequoia Fund have significant stakes which are two highly reguarded money management firms.
The author suggest current research before investing.