For my first latest purchase post I decided to make a post about a fantastic company – SNA.  I was able to purchase 10 shares at a price near $152, which was good timing.  Less than a week later they released solid earnings for Q3!

I have always loved companies that make quality products in a niche market. It allows them to charge premium prices, which allows investors to reap the rewards from. A great example of that is Snap-On incorporated (SNA).

Background

Per Snap-On’s website, “Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks.  Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education.  Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels.  Founded in 1920, Snap-on is a $3.4 billion, S&P 500 company headquartered in Kenosha, Wisconsin.”.

I love that Snap-On’s products can be found in so many industries and countries. In fact, their products are sold in more than 130 countries. This really helps them create a strategic moat around their brand. Additionally doing some quick research on their products themselves, they have fantastic reviews on Amazon. That really shows the quality of their product.

Metrics

As of 10/27/2017 the price to book value was 3.91, which is generally on the high end for me. Additionally their top-line isn’t growing as fast as I’d like, however their net income has been growing by 13-14% the last couple of years due to them reining in costs. Couple this with their stock repurchase program they’ve been able to grow their EPS quite significantly. Their P/E ratio stand at 16 at the time of this writing. Their 5-year dividend growth rate is 14.9%, which is quite impressive, even though the current dividend yield is 1.8%. November is generally the time of year when they raise their dividend, so I’ll be on the lookout for that next month. I’m guessing it’ll be $0.81 per share, but who knows, we might be in for a surprise!

Final Thoughts

I really like this stock, but I was only able to buy 10 shares of SNA recently, which is going to add $28.40 to my annual dividend income. Once I get some more capital together I’d like to buy more. I love the fact that this company has quality products in numerous markets.  It allows them to have a strong strategic moat around them which will help the company grow in the future.  Additionally I love the fact that the PE ratio is so low compared to the S&P 500 as a whole, and it’s growing earnings at nearly 15%!

What are your thoughts on SNA?

 

-CD

Categories: Purchases