Following my recent article on how Warren Buffett’s early investments helped to transform him into an investing guru, I thought it would be a great idea to use some of Stockopedia’s own value screens to search for Buffett-esque investments in today’s market.   

Buffett began his career as a deep value investor, searching for stocks selling below their intrinsic value according to the criteria of his mentor Benjamin Graham. He called these bargains ‘cigar butts’... explaining: “A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit.”

A word of warning... the following ideas are highly illiquid small-caps, certainly not for widows and orphans. Additional research is definitely required before making any investment decision.

Seeking a catalyst

Gencor Industries Inc qualifies for the Benjamin Graham Net Nets Screen, the Negative Enterprise Value Screen and the Benjamin Graham NCAV Bargain Screen, so the numbers clearly stack up.

Gencor is a U.S. based company, which manufactures heavy machinery used in the production of highway construction materials. At the end of the second quarter, Gencor had $97.3m of cash and total liabilities of $5m. Shareholder equity totalled $115m, or around $12 per share (price to tangible book 0.8).

Gencor's performance has been dismal over the past six years. Sales have fallen at a compounded annual rate of 11.1% and net profit has fallen at a CAGR of 15.1%.

rWLXpFo1KGzSB9twEWRZueys9CyxWHkgJyW3SmYg

Its poor performance can be blamed on the U.S. federal government. All road projects within the U.S. are funded by the Federal Highway Trust Fund, which narrowly avoided bankruptcy this summer and is already in trouble again.

Of course, this has put the brakes on many road repair and highway construction projects. But at some point the Federal government will have to face up reality and infuse the fund with cash, which is likely to be the catalyst that restarts Gencor’s growth.

Unfortunately, until then the company is going to struggle to drive organic growth. Management is well aware of this, so they are looking for bolt-on strategic acquisitions to boost revenue and profitability. With many of Gencor’s peers also struggling, there are some bargains out there that could be snapped up with Gencor’s impressive cash balance.

Further, as business has…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here