David Dreman (Trades, Portfolio) is the founder and chairman of Dreman Value Management, LLC and also serves as the firm's chief investment officer. A regular columnist for Forbes for 25 years, Mr. Dreman's recent best-selling book, "Contrarian Investment Strategies: The Next Generation?" was published in the spring of 1998. Three years back, in 2012, he published his last book, “Contrarian Investment Strategies: The Psychological Edge."
The contrarian and the value guru, Dreman's investment philosophy is based on low P/E approach to stock selection. The philosophy at Dreman Value Management: "We invest in undervalued companies that exhibit strong fundamentals, above-market dividend yields and historic earnings growth, which our analysis indicates will persist. Our strategy is to own strong, fundamentally sound companies and to avoid speculative stocks or potential bankruptcies." They believe that the markets are not perfectly efficient and that behavioral psychology influences investor actions and reactions.
Mr. Dreman’s portfolio has a total value of $1,216 Mil with a focus on the Financial Services sector, that represent the 28.8% of stocks.
He has big stakes First Niagara Financial Group Inc. (FNFG), Gran Tierra Energy Inc. (GTE) and Rait Financial Trust (RAS) but over the last two years he heavily increased his position in Barnes Group Inc (B).
Barnes Group Inc has a Market Cap of 2,153 $M, and it is an industrial and aerospace manufacturer and service provider, serving end markets and customers. Its engineered products and services are used in critical applications that provide transportation, manufacturing and technology. The company operates under two business segments: Industrial and Aerospace. Industrial is a manufacturer of engineered, quality precision parts, products and systems for critical applications serving a diverse customer base in end-markets such as transportation, industrial equipment, consumer products, packaging, electronics, medical devices and energy. Industrial segment participates in the design phase of components and assemblies whereby customers receive the benefits of application and systems engineering, new product development, testing and evaluation, and the manufacturing of final products.
He started to trade Barnes Group in 2010 buying and selling it with big gains. In Q4 2013 he started to increase his position and in the last two quarters of 2014 and in the current first quarter of 2015 he reached a total of 279,826 shares with an increase of 41.54% and 36.57%. Dreman is currently holding Barnes Group at an average price of $23.73 with a total gain of 68%.
The stock is currently trading at $40 with a trailing P/E of 18.50 at an average level of the company history but still better then 77% of Global Diversified Industrials industry competitors.
The P/B ratio is 2.00, higher then 66% of other competitors and against an Industry Median level of 1.87.
The profitability is rated 5/10 with ROE of 10.33%, ROA of 5.53% and ROC of 30.72%. The company had better ratios in the past but regardless of this, they are now still outperforming the industry, being better then 80% of competitors.
Financial Strength is rated 7/10 with a Cash to Debt of 0.09 Vs and Industry Median of 0.80. This ratio is at the same level of the last 10 years.
Summmarizing the most important ratios :
| Â | Barnes Group | Industry |
| Price | Â | Â |
| P/E (ttm) | 18.50 | 24.50 |
| P/B | 2.00 | 1.87 |
| Â | Â | Â |
| Profitability | Â | Â |
| ROE | 10.33 | 7.63 |
| ROA | 5.53 | 3.71 |
| ROC | 30.72 | 12.81 |
The company over the last five years faced a strong growth in EBITDA (13.90%), EPS (15.20%) and Book Value (14.30%) while Revenue increased just by 3.70%.
At current prices the stock looks undervalued by 96% based on the DCF model, while the Peter Lynch Earnings Line gives a price of $37.7.
The company has a yeld of 1.10% with a reasonable payout ratio of 21%. It started to give dividends on late 1985 and over the last five years, the dividend growth rate is 9.30%.
James Barrow is the main holder of B, holding 3.69% of Outstanding shares. Other Gurus are Steven Cohen with 0.73% and Third Avenue Management with 0.49%
Third Avenue Management bought 264,348 shares on the last quarter, Steven Cohen bought 398,800 shares and Joel Greenblatt bought 21,727 shares.
Over the last quarter just Chuck Royce reduced his position and he did it by 40.48%.
