Street Wise: Is a Pa. maker of bronzes gold?

It is apparently a fact that, regardless of the stock market’s direction, people still die at a pretty regular pace. Morbidity aside, there is good reason to take a close look at Matthews International Corp. in Pittsburgh, a company that derives more than 62% of its profits from the sale of bronze grave markers.

A small-cap value stock that is thinly traded and barely watched by industry analysts, Matthews has proven stubbornly resistant to the vortex of the broad market indexes.

Up nearly 47% over the past year – compared with drops of 26.4% by the Russell 2000 stock index and 60% by the Nasdaq Composite Index – Matthews continues to leverage its market strength by buying smaller competitors. Over the last six months, as market indexes have seen increased volatility, Matthews’ stock has gained more than 14% to trade in the $32 range.

The company, which has a whopping 50% market share of the bronze-marker business, completed 20 acquisitions over the past five years.

CEO David Kelly says the shopping spree “trailed off in 2000, but it is heating up again this year.”

In terms of the company’s stock performance, Mr. Kelly calls it a “steady Eddie – we’re not as glamorous as a dot-com.”

Founded in 1850, Matthews went public in 1994, but its three main business lines – bronze, graphics and product marking – seem to have been lost on much of Wall Street.

The only analyst following the company, Steven Baumgarten of Parker/Hunter Inc. in Pittsburgh, has a 12-month price target of $40.

Mr. Baumgarten says Matthews often trades in line with funeral home stocks, which tend to carry lots of debt. Matthews has just $18 million worth of debt, equal to its cash and investments.

But as interest rates drop, the association has not been a bad thing, as investors recognize the advantages for debt-heavy companies.

“The funeral home industry has been the near-term catalyst,” Mr. Baumgarten says. But he believes the bigger picture is the company’s growth-through-acquisitions strategy.

Energy shines

Energy sector stocks continue to shine in anticipation of the dark days ahead.

Swift Energy Co., an oil and gas exploration company in Houston, is expected to benefit from growing demand in summer, when natural gas will be a key component to keeping the lights on.

Ted Kellogg, manager of the Boston Partners Long/Short Equity Fund, says the need for natural gas to run power generation will inhibit the traditional buildup of natural gas reserves during the summer months.

“The inventory is tight and getting tighter,” he says. Swift, now trading at $33, is up more than 167% over the past 12 months.

The stock has a consensus “strong buy” rating, with recent upgrades coming from Jefferies & Co. and CIBC World Markets.

Questions, observations, stock tips? E-mail Jeff Benjamin at [email protected].