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Gabelli Steps Closer Towards 6% Ownership of Superior Industries International

December 03, 2012 | About:
After his recent increase of his Superior Industries International (SUP) stake, Gabelli has reported 5.87 percent ownership of the company as of Nov. 30, according to GuruFocus Real Time Picks.

The transaction places his total holding at 1,599,001 shares; he reported to owning only about 1.46 million shares at the end of the third quarter.

Gabelli first acquired the company in the third quarter of 2008 when the stock sold at an average price of $12.26. Since then, Gabelli has traded consistently and consecutively in the quarters leading up to recently. His current holding is his largest of the company, yet, as it trades at $18.97 per share.

Headquartered in Van Nuys, Calif., Superior Industries International designs and manufactures aluminum road wheels for sale to original equipment manufacturers, with operations across the U.S. and Mexico.

Auto companies Ford Motor (F), General Motors (GM) and Chrysler accounted for 76 percent of the company’s total sales in the first three quarters of 2012, according to a 10-Q form filed to the SEC dated Sept. 30. The company also manufactures aluminum wheels for Nissan (NSANY), Toyota, BMW, Subaru, Mitsubishi (MSBHY) and Volkswagen.

Net sales in this year’s third quarter decreased 6 percent compared to the same period one year ago, while the company’s wheel sales decreased 7 percent for the quarter, causing the average sale price of its wheels to slump. The decreases were primarily due to the average price decline of aluminum and the weakening value of the Mexican peso.

On a positive note, production of passenger cars and light trucks products increased by about 15 percent in Superior’s third quarter to meet customer demands, and consolidated operations income increased 5 percent compared to the same period last year.

1354566356014.pngSUP data by GuruFocus.com

Superior Industries has fought to maintain stability over the past couple of years, especially since the automobile industry took a hit during the 2008 recession. Still feeling its after-effects, the company admits in its latest 10-Q that the Superior cannot guarantee whether it could sustain all of its product demands for the upcoming years. In the form, it states:

Vehicle demand is subject to many unpredictable factors such as changes in the general economy, gasoline prices, consumer credit availability and interest rates. Demand for aluminum wheels can be further affected by other factors, including pricing and performance comparisons to competitive materials such as steel. Finally, the demand for our products is influenced by shifts of market share between vehicle manufacturers and the specific market penetration of individual vehicle platforms being sold by our customers.

As the company engages in programs to reduce its costs and improve its operational practices, with consistent attempts to take control of situations amidst price changes, it also expresses additional fears pertaining to customer demands, saying that additional factors such as inconsistent ordering patterns, increasing product complexity and heightened quality standards make it difficult to reduce its costs; strategies and programs used to reduce costs also ultimately use up operations and cash flow resources, which according to 10-Year Financials, Superior has also been trying to regulate.



Its 10-Q form states:

While we historically have had long-term relationships with our customers and our supply arrangements generally are for multiyear periods, maintaining such long-term arrangements on terms acceptable to us has become increasingly difficult. Despite recovery of the market for our products since late in 2009, global competitive pricing pressures continue to affect our business negatively as our customers maintain and/or further develop alternative supplier options. Increasingly global procurement practices and competition, and the pressure for price reductions may make it more difficult to maintain long-term supply arrangements with our customers. As a result, there can be no guarantees that we will be able to negotiate supply arrangements with our customers on terms acceptable to us in the future.”

Not surprisingly, Superior Industries is rated one star in Business Predictability. While the company has doubts about its ability to sustain its product demands, its Financial Strength appears strong at a perfect 10 rating, and a 7 out of 10 Profitability and Growth rate.

With a market cap of $515.7 million, and an enterprise value of $295.8 million, Superior Industries sports no long-term debt, a dividend yield of 3.4 percent and a dividend payout ratio of 0.5. Superior’s trade price is close to its one year high, and its three Good Signs reveals a strong Altman Z-Score and comfortable interest coverage.

Besides Gabelli, other Gurus who have holding of Superior Industries include Paul Tudor Jones, Joel Greenblatt, John Keeley and Chuck Royce. (SUP: Holding History)

The company’s Insider activity is virtually nonexistent, having only experienced seven trades in the entire year of 2012, with its last one in August, for a mere sell of 402 shares by the company’s vice president, Toyne Cameron. (SUP: Insider)

To view Gabelli’s latest trades, visit Mario Gabelli’s stock picks. Also view his top holdings, his undervalued stocks and his top yield stocks

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About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website


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