This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Understanding the Stock Market: Tecumseh, Office Depot

My base case valuation for this stock, at $30 per share, is based on the company achieving one-half of the margin improvement targeted by management. The stock recently traded at $13.74, down from a 52-week high of $36 per share. Investors in this stock will not have to wait long to see a rebound in operations. Numerous internal initiatives, such as expansion of higher-margin private-label offerings and sourcing of product to China, are already well under way.

Mueller Water Products (MWA.B): There are a number of facets to this story that are certain or near certain: that Mueller Water is the No. 1 or No. 2 player in most of the water infrastructure markets in which it participates, that there are high barriers to entry in most of its end markets, and that the company has a huge installed base that drives recurring revenue (i.e, replacement parts).

The good news for investors in this stock is that the company's subnormal operating performance is almost entirely due to external factors -- about one-third of sales are linked to new residential construction. The value of this company is at least double the current stock quote. It recently traded at $8.80 per share. My model suggests a value of $22 to $24 in a couple of years.

It's worth noting that the American Society of Civil Engineers assigned a grade of D-minus to current water infrastructure. With leakage rates running as high in 20% in some areas, studies indicate that $180 billion needs to be spent over the next 20 years to fix our water infrastructure. Since I can't predict when an impetus to fix our water infrastructure will develop, I've excluded such a scenario from my valuation calculation. I mention it only because it represents significant upside to my estimates.

Note that there are two classes of stock, A and B, for Mueller Water Products. While the B series has superior voting rights, I expect the classes to merge into one class in a couple of years. A tax issue related to the spinoff from Walter Industries (WLT) prevents changing the stock structure for a few more quarters.

This column was originally published on RealMoney on May 19, 2008 at 1:00 p.m. EDT. For more information about subscribing to RealMoney, please click here.

At time of publication, Alsin and/or ACM was long TECUA, ODP and MWA.B, although holdings can change at any time.

Arne Alsin is the founder and principal of Alsin Capital Management, an California-based investment advisor. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback; click here to send him an email.

3 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,493.37 -69.93 -0.42%
S&P 500 1,925.15 -5.52 -0.29%
NASDAQ 4,352.6390 -17.1340 -0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs