NACCO Industries, Inc. (NC, Free Analysis) is a conglomerate that services four markets, including lift trucks, small appliances, specialty retailing and mining. With about a third of its market capitalization in cash, a 2.31% dividend yield and a diversified set of businesses, investors may want to take a look at this strong-performing company as a potential play for their stock portfolios.

Strong Operating Performance Drives Growth

Last quarter, NACCO Industries reported revenues that increased 10.7% to $598.8 million and net income that improved from 19 cents to $1.91 per share, year-over-year. While operating cash flows fell modestly, the company’s still generated $39.4 million during the six months ended June 30, 2010, while its $13.8 million in free cash flow helped it further enhance its cash position to $270 million, or roughly $32.38 per share.

The company’s Material Handling Group constitutes the majority of this revenue with $413.5 million in sales last quarter. Higher sales volume and lower manufacturing variances helped this division increase its revenues by 14.2%, while swinging to an operating profit of $9.8 million from a loss of $1.7 million during the prior year period. Meanwhile, the company expects volumes to “improve significantly” during the second half of 2010.

The company’s second largest division, the Hamilton Beach Brands, realized $103.3 million in revenues last quarter, which down marginally from a year-ago due to lower average selling prices and volumes. However, the firm is quick to note that this division sees the majority of its sales occur during the latter half of the year during holidays, and it is moderately optimistic that the markets for consumer goods will strengthen further during the second half of 2010.

Strong Financial Condition Represents Value

In addition to its strong growth, NACCO Industries also represents a stock that trades at a discount to its intrinsic value. Many investors attribute this discount to its complex set of businesses, but a consistent dividend and strong cash flow generation make this stock a relatively safe bet that could see its value increase over time.

Currently, the company trades with a forward price-earnings ratio of 9.27x and a price-earnings to growth ratio of just 0.39, suggesting that it may be undervalued. And with approximately a third of its market capitalization in cash and a price-to-book ratio of just 1.95x, the stock is a relatively safe bet in an uncertain market.

Finally, the company generates strong cash flows that fund its consistent 2.31% dividend yield. While this yield has gone down as the stock’s price has surged more than 100% during the past 52-weeks alone, investors may want to continue taking a look at this high-quality conglomerate.

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Labor Day weekend marked the last major camping weekend of the summer, while also ushering in the hunting season for many people in the United States. Many outdoor retailers are also excited about the hunting season, as the cold weather draws customers to higher margin clothing products. And in a year of significant cutbacks by consumers, some are betting on a strong hunting season given its low cost.

Small towns like Sioux Falls, South Dakota have seen so many hunting permit requests beginning this month that they will hold a lottery to decide who gets licenses. Many other cities in the Western U.S. are also experiencing larger deer herds, which lead to more permits being issued in order to thin the herds and avoid car accidents and animal starvation.

Dick’s Posts Gains, but Faces Western Troubles

With revenues up 8.8% and net income up 30.3% during the quarter ended July 31, 2010, Dick’s Sporting Goods, Inc. (DKS, Free Analysis) posted a strong summer sales season driven by increases in hardlines, apparel, footwear, and golf products. Meanwhile, same-store sales benefited from a 5.1% increase in transaction volume, as consumers start to open up their wallets a bit more.

But despite the solid performance, Dick’s Sporting Goods has experienced some problems with its Western and Southern expansion in the U.S. This led Goldman Sachs analyst Michael Fassler to cut his rating on the stock from a “Buy” while lowering his 12-month price target by $1.00 to $30.00 per share. Whether or not the retailer can exceed expectations in California and Texas remains up for debate.

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Big 5 Dominates the Western Markets

While Big 5 Sporting Goods Corporation (BGFV, Free Analysis) posted a lower gain in sales than its aforementioned competitor, its 1.8% increase in sales and 2% increase in net income still bodes well given the slowdown in retail. The firm attributed the declines to the sluggish pace of the economic recovery and unfavorable weather conditions in its markets.

Luckily, these issues could be reversed if the winter hunting season proves robust and demand picks up at its stores. Meanwhile, the company rates at a lower earnings multiple than many of its competitors – some by nearly half – and even pays a modest dividend yield of 1.63%. Combined, this stock could be a compelling bet on a strong winter season.

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Cabela’s Insiders are Hunting for Stock

With significant insider purchasing over the past few weeks, Cabela’s Incorporated (CAB, Free Analysis) is quickly popping up on the radar of many investors. Moreover, value investors are driven to the company’s strong free cash flow yield of more than 30% as justification for its 18x earnings multiple that trades at a modest premium to some of its peers.

Director Mark Reuben was among the insiders who scooped up some $1.7 million in stock this summer, which sent a rather strong signal to the market. And with an average purchase price of around $15.80 per share, investors have the opportunity to invest alongside the directly at roughly the same price. As a result, this may be a stock worth taking a second look at for many investors.

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EarthLink, Inc. (ELNK, Free Analysis) is an Internet Service Provider, or ISP in industry jargon, which provides dial-up, DSL, and digital phone services, as well as web hosting and PC software tools to consumers and businesses. The company’s business strategy is focused on generating strong cash flows by focusing on customer retention, operational efficiency and growth opportunities.

Fewer Customers and Dropping Margins

The ISP industry is characterized by trends towards faster internet access speeds and lower prices thanks to intense competition. While this is great for consumers and even online publishers that rely on high speeds, many dial-up provides and small ISPs have struggled to remain competitive. Hundreds of small firms have been forced to shut their doors as cable and phone providers have taken market share.

EarthLink plans to counteract these trends by reducing their sales and marketing efforts and instead focusing on retention of customers and marketing channels with higher margins. While this strategy has resulted in a decline in revenues, the company expects the rate of revenue decline to decrease as its subscriber base becomes more tenured and churn rates decline.

Still, the company has no solid turnaround plans other than looking for ways to grow or scale their business services segment. As a result, investors can expect revenues to continue declining, while the company’s cost-savings efforts help boost the bottom line. Unfortunately, these cost-savings are likely to be only temporary, creating a need for a change in corporate direction.

Solid Financial Footing with a Dividend to Kick

Despite its troublesome industry economics and lack of a cohesive strategy, EarthLink remains in great financial shape and pays a 7% dividend yield. The stock trades at a price-earnings ratio of under 4x, while it has more than $610.9 million, or $3.19 per share, in cash. The company’s quick ratio also stands at a strong 3x, making it a relatively safe bet trading at a significant discount.

Its existing operations also spin off significant cash flows that have remained stable over the years. In fact, the stock’s price-to-free-cash-flow stands at a significant 7.48x, making it a stock that fundamental value investors like Benjamin Graham and Warren Buffett may take an interest in analyzing, if it weren’t for industry headwinds that have been hitting its top and bottom line results.

In the end, EarthLink could become a great value investment if it is able to successfully turnaround its core operations. However, a failure to mount a successful turnaround would result in continued revenue declines and margin pressures that could ultimately cripple the stock price.

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Kingtone Wirelessinfo Solution Holding Ltd. (KONE, Free Analysis) is a leading China-based software solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations. By extending clients’ existing infrastructures to include mobile participants, the company can do everything from improve communication to enable greater sharing.

For instance, Yan-An’s police department implemented the solution to increase the effectiveness of patrolling and case reporting. Among other things, the wireless system enabled patrol officers, community police and investigators to more efficiently share information, while also expediting case time, improving cooperation between forces and enhancing information sharing.

As the first Chinese company focused predominantly on developing mobile enterprise solutions, the firm has already completed more than 130 successful client installations and has accumulated special knowledge and expertise that directly resulted in the creation and development of its proprietary adaptable middleware platform and array of software applications.

During the full year 2009, these attributes helped Kingtone report sales that grew 162% to $11.24 million as its net income jumped 421.9% to approximately $5.3 million, or $0.48 per share. Despite the rapid growth, the company’s stock trades at just $2.20, which represents a price-earnings ratio of just 4.58x. Assuming just 20% growth rates, its share price should be closer to $9.60 per share.

Meanwhile, the company has also maintained a strong financial position with $15.9 million, or $1.14 per share in cash, representing approximately half of its market capitalization. Subtracting this from its share price yields an adjusted price-earnings multiple of 2.2x its 2009 earnings, making it significantly undervalued even by very conservative standards.

In the end, Kingtone represents a play on China’s growing wireless infrastructure that appears to be significantly undervalued. And with high barriers to entry and a very stable customer base with high profile and government organizations, this stock is likely to continue its move higher over the long-term.

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Amidst negative U.S. GDP revisions and concerns about a slowdown in China, India quietly announced that its economy accelerated last quarter from sharp increases in its manufacturing, mining and service sectors. In total, the country’s economy grew at a rate of 6.8 percent during the quarter ended March 2010, making it one of the fastest growing economies in the world.

While some portions of the economy, such as industrial production and exports have showed signs of slowing this quarter, many other sectors like banking, technology and telecom seem to be quite robust. Many investors are therefore seeking high returns by targeting large cap stocks within these sectors, which are poised to grow with the country’s young population and ambitious leadership.

India’s Banking Giant Reports Solid Gains

ICICI Bank Limited (IBN, Free Analysis) is a leading provider of financial services in India’s rapidly growing economy, which puts it in a strong position to profit if the trend continues. Even as the country moves from rapid growth to sustainable growth down the road, the banking sector stands to benefit from higher consumer income, a steadily growing GDP and strong demand for loans.

Last quarter, the Indian banking giant reported revenues that increased 17% year-over-year from $189 million to $221 million, while its non-performing asset ratio fell to 1.62% from 2.19%, indicating a higher quality portfolio of loans. And with a strong capital adequacy ratio of 20.2% and Tier-1 adequacy of 14%, investors can be assured that this bank will be around for the long haul.

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Profit from India’s Continuing IT Boom

While the banking sector may be attractive for internal growth, one of India’s largest exports is its IT services sector that continues to drive its economy. Companies like Patni Computer Systems Limited (PTI, Free Analysis) are among those providing IT services around the world. As technology continues to advance, India’s highly educated developers are likely to remain in demand for some time.

Despite a crumbling global economy, the IT services provider reported a marginal increase in its revenues and a meaningful 10.4% increase in its bottom line net income. Meanwhile, management indicated that some of its projects may be running behind schedule, but it anticipates that its strategic investment will pay off in the mid to long run, making the firm one worth watching closely.

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Play Growth in Domestic Markets with a Telecom

With the ubiquity of mobile phones these days, Mahanagar Telephone Nigam Limited (MTE, Free Analysis) remains one of the best ways to play growth in the country’s middle class. The company is one of the largest providers of telecommunications services within the country’s largest cities of Mumbai and New Dheli, and trading with a P/E of 6.48x and a dividend yield of 3% makes it a very cheap bet.

Despite the slowdown abroad, the telecom provider reported net income that increased 2%, while the future of telecom demand in the country remains bright. Internet usage within the country has increased from 1.6% of the population in 2002 to nearly 7% of the population in 2010, while many analysts expect the industry to continue to boom during the coming years.

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Medifast, Inc. (MED, Free Analysis) is a provider of weight management and disease management products and other consumable health and diet products. Despite a poor economic environment, the company reported earnings growth of 77.8% this year and analysts expect that figure to remain steady at around 25% per year over the coming five years.

Despite the strong performance, many traders are placing bearish bets on the company’s upcoming earnings results. Currently, short sellers have borrowed approximately 18% of the firm’s float in short trades, which indicates a strong bearish sentiment on the stock. But judging on past performance, many investors are inclined to stick with the stock as it continues to trade near its highs.

With a 25% 5-year projected earnings growth rate and a forward price-earnings multiple of around 15.27x, Medifast’s stock trades with a price-earnings to growth ratio of only 0.61x, which indicates that it may be significantly undervalued given its growth potential. The figure could also be read to suggest that investors are really only expecting 15% growth over the next five years.

So, will this growth continue? Since its Take Shape for Life channel accounts for approximately 63% of its total revenue, investors can take a look at open source ways to measure this segments performance to get an idea of the coming quarter. For instance, a quick search on www.alexa.com for www.tsfl.com yields a chart showing a 12% one month gain that could indicate continued success in this segment.

Meanwhile, the segment’s health coaches also offer it a high competitive barrier, since these individuals are highly incentivized and focus on one-on-one communication with their clients. At the same time, many individuals are pursuing this career path given the current economic environment and the desire to achieve supplemental income, which has driven its number of health coaches past 8,000 last quarter.

In the end, Medifast is a rapidly growing company that has seen blistering growth. Many traders are betting that this growth will slow down sooner-than-expected, but many investors disagree as the stock price remains high, while some open source measures also suggest continued growth. As a result, this is a stock that investors may want to keep an eye on moving forward.

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While China’s wealth may have financed U.S. consumers up until 2010, the coming decade may mark a shift from others’ consumers to its own. The shift is necessary in order to help China reduce its reliance on exports and help the U.S. and E.U. return to more normalized trade balances. After all, China’s massive exports have fueled record trade deficits in the U.S. and other Western countries. So, what companies will benefit most from this shift from an export to a consumer economy?

An Educated Bet on China’s Entrepreneurs

China Executive Education Corp (CECX, Free Analysis) is an educational services provider that offers comprehensive training programs to entrepreneurs and other executives in China. These entrepreneurs are the cornerstone of a consumer-centric society, providing much-needed products and services, as well as providing work to a large portion of the population.

With some 35 million entrepreneurs with little formal training, the company addresses a large and growing need in the marketplace that is expected to grow from $294 million in 2002 to $4.4 billion by 2012, representing a 31.1% compound annual growth rate. And having served some 2,874 business owners already, the firm is well-positioned in the marketplace moving forward.

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A Powerful Bet on Domestic Expansion

China Power Equipment Inc. (CPQQ, Free Analysis) is a provider of transformers and related power products in China. These are essential components of any power grid that perform final voltage reduction before power is consumed. As China becomes richer on a per capita basis, cities will grow larger by 240 million people over the next 15 years, creating the need for more and more power.

Earlier this month, the company reported revenues that increased 27.3% to $7.49 million and net income that increased 31.5% to $1.72 million, or 8 cents per share. Meanwhile, the firm remains very well capitalized with $13.6 million, or $0.70 per share, in cash and more than $26.5 million in total assets compared to total liabilities of just over $1.86 million, making it a relatively safe bet.

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An Under Appreciated Oil Giant

PetroChina Company Limited (PTR, Free Analysis), a provider of oil and gas in China, is perhaps one of the best known Chinese public companies, but it appears undervalued to many investors. Currently, the company trades at just 11.5x its trailing 12-month earnings, despite posting growth rates of 31% this year and projections of 28% growth next year, while also paying a 3.5% dividend yield to kick.

With General Motors projecting that China’s auto market will grow faster than in the U.S., the oil industry is sure to benefit from greater demand for gasoline. Meanwhile, increasing wealth inevitably leads to greater use of natural gas powered heat and cooling systems. Even rubber products, made from oil, tend to grow along with a consumer population – all creating demand for PTR.

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The company’s Attain Fertility Centers division consists of 41 contracted fertility centers, each with multi-physician offices, located in major markets across the United States. Meanwhile, the firm’s Vein Clinics of America division manages a network of 35 clinics located in 13 states, which specialize in the treatment of vein disease and other vein disorders.

Significant Growth and a Solid Balance Sheet

During the second quarter, IntegraMed reported revenues that increased 10.1% to $61.8 million, while net income increased 45% to $1.16 million, or $0.14 per share. The company attributed the results to an increase in the firm’s Attain IVF Programs as well as the addition of three new contract fertility clinics, as its business continues to boom despite the economic recession.

Meanwhile, new patient visits, which are a leading indicator of future fertility treatments, and IVF cycle volumes were approximately even with the prior year due to the lingering effects of the current economic cycle and the loss of a large payer contract in 2009. However, the average revenue per cycle increased 7.2% due to the change in payer and procedure mix throughout the network.

A Sharply Undervalued Stock by Several Metrics

Trading with a price-earnings ratio of 18.52x its trailing 12-month earnings, the niche medical company may seem expensive if it weren’t for its blistering 25% growth rate projected for the next five years. The company also boasts a solid balance sheet with enough cash to cover its current liabilities and a quick ratio of more than 2.2x, indicating that it is very well-capitalized.

But perhaps its biggest financial draw is the firm’s impressive free cash flows that reached $12.2 million during the second quarter of 2010 alone. The company has maintained these free cash flows for the majority of its time as a public company, while also limiting its long-term debt to just $12.7 million.

Conclusions

IntegraMed America is a significantly undervalued company operating in niche medical fields. After reporting strong earnings growth, the firm continues to trade at just 18.52x its trailing 12-month earnings with a projected 25% growth rate over the next five years. As a result, investors may want to consider this stock as a potential value play for their portfolios.

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Bonds Appear to Be Sharply Overvalued

After the economic crisis hit stocks, many investors fled into the bond market seeking a safe-haven for their capital. Treasury bonds represented a large chunk of this investment, but even junk bonds surged in popularity. Unfortunately, any asset that sees a sudden influx of cash often becomes overvalued, and bonds are no different than any other asset class.

While investors holding bonds until their maturity will lose nothing but opportunity costs, those that actively trade bonds could be in for a world of pain. Bond prices are inversely proportional to bond a yield, which means that current bonds are trading near record highs. For example, U.S. Treasury yields are trading at historic lows of just 3.61% for a 30-year bond.

If an economic recovery takes hold, Treasury yields could increase as interest rates rise, while rising inflation could also send yields higher. On top of that, structural problems with the U.S. debt load and future obligations are no secret and failure to correct those problems could result in a lack of confidence in the government and therefore higher yields.

Dividends Offer a Better Safe-Haven

While bonds are all the rage right now, safe dividend paying stocks may offer a better investment opportunity. Companies like Kraft Foods Inc. (KFT, Free Analysis) pay dividend yields of 3.89%, while investors can benefit from the potential for capital gains on top. Similarly, companies like Exxon Mobil (XOM, Free Analysis) and Johnson & Johnson (JNJ, Free Analysis), offer strong dividends.

These three names are also very safe stocks to own during an economic decline. Kraft has a beta coefficient – a measure of volatility – of 0.60, which indicates that it is far less volatile than the overall market. Meanwhile, Exxon Mobil’s beta coefficient stands at just 0.48 and Johnson & Johnson’s is stable at around 0.56, making all of these stocks relatively low risk from a technical standpoint.

From a more fundamental standpoint, consumers will always need the food, fuel and medical attention offered by these three companies. While some of these companies are somewhat sensitive to consumer demand and input costs, they are the largest players in their industries and are the least likely to fold in a worst case scenario.

Conclusion

Investors pouring money into bonds may want to reconsider their positions as yields appear to be bottoming out and prices may be close to topping. Large capitalization stocks that pay a dividend may be a better alternative as they pay roughly the same yields as many bonds, while offering capital gains potential and lower volatility and risk in some cases.

Recently, the company decided to combat the decline in its automotive end-markets by lowering its selling prices and reducing warranty benefits and reducing costs, according to its latest 10-Q filing. The result was higher revenues and a gain in gross profit. However, the company fell short in concealing the losses in its aviation division, which saw sales increase just 1.1% as gross profits fell 4.4%.

Garmin’s nuvifone has also faced a lukewarm reception by consumers and investors, while its competitive edge as a GPS provider may be quickly disappearing. A number of popular consumer electronics reviewers failed to see the phone’s draw, while competing phones are increasingly being equipped with GPS capability running on a number of different software solutions.

The one area that the company has seen success is in its outdoor and fitness business, which provides GPS-based products for athletes. As of the first quarter of 2010, the company generates some 24% of its revenue from the segment that grew 31.8% during the second quarter alone. Meanwhile, the company’s marine segment also grew a strong 23.4% during the quarter due to an increase in market share.

Unfortunately, growth in Garmin’s outdoor segment may be somewhat limited moving forward. The company already holds approximately 70% of the market share in the outdoor and fitness market, according to a 2009 Barclay Conference presentation, which could significantly limit its upside. And once this disappears, its marine segment remains the lone bright spot in a sea of declining products.

The marine segment controls approximately 25% of its market, according to the same Barclay’s presentation, and continues to grow at a rapid clip. In addition to the improving revenue, the segment was also able to improve its gross profits by more than 37% thanks to a more favorable product mix. The combo helped to boost Garmin’s overall results, but investors are left to wonder for how long…

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