Finally, we’ll take a look at Titan International Inc (NYSE:TWI). First things first: The dividend, listing in at 0.1%, is completely unsatisfactory. Also, a beta of 3.18 indicates a volatile stock (the S&P’s beta is 1, therefore Titan International Inc (NYSE:TWI)’s 3.2 beta is over triple the market) that will give moderate-risk investors heart palpitations. Lastly, profit margins weighing in at 4.1% underwhelm.
Additionally, Titan International Inc (NYSE:TWI)’s balance sheet clearly needs some work; it has almost twice as much debt as cash. However, one positive aspect of Titan International Inc (NYSE:TWI) is that it markets its products to off-highway vehicles used in the agricultural, construction, and consumer markets, both domestically and abroad. This unique aspect firmly establishes Titan International Inc (NYSE:TWI) as niche market player within the tire sub-sector, and establishes a competitive advantage over its rivals. Yet despite these advantages, Titan International Inc (NYSE:TWI) doesn’t fit my criteria for a “buy and hold” stock due to its aggressive growth strategy, which is arguably more risky than a blue chip.
Best of Breed
Based upon my (above-mentioned) analysis and its superior yield / growth opportunities, my pick is Cooper Tire & Rubber Co (NYSE:CTB). IIf investors are looking for potential upside and want to collect a decent, but not outstanding, dividend, they should further investigate whether Cooper Tire & Rubber Co (NYSE:CTB) fits their investment criteria. Having said that, as with any stock, be sure to do your due diligence prior, during, and after investment.
The Bottom Line
Although rubber tires are an essential good in the global economy given razor thin margins and many superior stocks in the market I wouldn’t invest in any tire company. And although this post is meant to provide a broad overview of relevant tire companies wise investors should as Peter Lynch advised: “invest in what [they] know.” Therefore, if tire stocks are largely outside an investor’s area of expertise the likelihood of making a poor investment decision and avoidable mistakes is higher than it otherwise would be and there a plethora of more profitable investment alternatives. But if you’re further inclined to invest in tires companies do the research. Otherwise it may be time to “burn rubber.”
The article Tire Companies: When the Rubber Hits the Road originally appeared on Fool.com and is written by David Mercer.
David Mercer has no position in any stocks mentioned. The Motley Fool owns shares of Titan International.
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