Under the Radar: National Presto

"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

It's tough to beat professional money managers by picking brand-name stocks. The big shots have access to management, sophisticated models and economic forecasts that you don't. But there's a shortage of research among micro-caps because there are too many stocks to cover.

As a result, small companies offer the best return potential. Many lesser-known stocks are "mispriced," meaning their share price is less than the intrinsic value of their businesses. By purchasing such stocks, you can beat professional money managers by a huge margin. It's hard to do the same by sticking with General Electric(GE Quote) and 3M(MMM Quote).

Eau Claire, Wis.-based National Presto Industries(NPK Quote) is a value investment deserving of recognition. The company makes small appliances, and defense and absorbent products. Although those three businesses appear to be unrelated, the company has a remarkable track record.

National Presto was founded in 1905 and started out manufacturing pressure canners for industrial use. When the U.S. Department of Agriculture deemed that method as the only safe way to pressurize low-acid foods, business took off.

Then, in 1939, the company entered the consumer market by introducing "Presto," a pressure cooker for home use. Early adoption was impressive, but the company temporarily halted operations during World War II to assist in the war effort.

During the next peacetime stretch, the company introduced new pressure cooker models and added a product to its lineup, the Presto Steam Iron, the first of its kind to use tap water instead of distilled water. The cost benefits were obvious to consumers, so the product was a hit.