Here’s Why You Should Consider Investing in Powell Industries (POWL)

Heartland Advisors, an investment management firm, published its “Heartland Value Plus Fund” fourth-quarter 2022 investor letter – a copy of which can be downloaded here. The fund has historically focused on identifying undervalued small companies with solid balance sheets that permit them to self-finance organic growth and strong free cash flow to raise their dividends over time. On top of that, the fund favor companies with compelling self-help strategies to provide an extra catalyst. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

In its Q3 2022 investor letter, Heartland Value Plus Fund mentioned Powell Industries, Inc. (NASDAQ:POWL) and explained its insights for the company. Founded in 1947, Powell Industries, Inc. (NASDAQ:POWL) is a Houston, Texas-based electronics manufacturing company with a $537.7 million market capitalization. Powell Industries, Inc. (NASDAQ:POWL) delivered a 29.16% return since the beginning of the year, while its 12-month returns are up by 56.53%. The stock closed at $45.35 per share on  February 6, 2023.

Here is what Heartland Value Plus Fund has to say about Powell Industries, Inc. (NASDAQ:POWL) in its Q3 2022 investor letter:

"It’s more accurate to say we favor companies with defensive characteristics that are likely to be secular winners, even if the economy doesn’t offer much of a tailwind. And once the next cycle begins, these are companies that stand to benefit as the economy re-accelerates.

An example is Powell Industries, Inc. (NASDAQ:POWL), which manufactures electrical power distribution equipment and components used in pipelines, offshore drilling platforms, data centers, and large industrial facilities. After experiencing a downturn along with oil prices in recent years, Powell is now enjoying a tailwind from energy’s rebound, especially liquified natural gas related. Order activity, in fact, has risen for six consecutive quarters. And for the full year, new orders rose 78% compared to fiscal 2021.

Powell enjoys self-help catalysts as well. The company, with significant insider ownership, has been focused on internal capital allocation moves lately to position itself for a more profitable future. In fiscal year 2022, for instance, the company divested a low-margin industrial valve repair division within Powell Canada. At the same time, the company has been investing in its higher-margin services business to improve its overall mix of revenue sources.

Yet, very few sell-side analysts cover the stock, and those who do, don’t seem to appreciate the internal and external tailwinds the company enjoys. This is where our selectivity comes into focus.


Our calculations show that Powell Industries, Inc. (NASDAQ:POWL) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Powell Industries, Inc. (NASDAQ:POWL) was in 6 hedge fund portfolios at the end of the second quarter of 2022, compared to 8 funds in the previous quarter. Powell Industries, Inc. (NASDAQ:POWL) delivered a 75.24% return in the past 3 months.

In (date of publication), we also shared another hedge fund’s views on Powell Industries, Inc. (NASDAQ:POWL) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q4 2022 page.


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Disclosure: None. This article is originally published at Insider Monkey.