The publicly traded debt of a large number of companies are traded at such low volumes that investors often must be patient when looking to add a quality name to their corporate bond portfolio.
Such is the case with NewMarket Corp. (NYSE: NEU).
With just over $200 million in long-term debt, there is only minimal trading in the security. The most recent trades have been at levels that should attract interest from investors. At $77.25, the 7.125% bonds maturing in 2016 are yielding over 11.5% to maturity, and 18.2% to the 2011 call at 103.563.
NewMarket is a Richmond, Va., based holding company with primary business in formulated packaging of lubricants and fuel additives.
Among the holdings of the company are Afton Chemical, Ethyl Corporation, NewMarket Services and NewMarket Development Company.
The company's chemical related products include HiTEC, GREENBURN, TecGARD, BioTEC, Axcel and MMT. Each of these labels is sold primarily through service stations and auto parts dealers. And NewMarket Development owns 64 acres of property in downtown Richmond.
NEU closed last week at $36.32, well above the 52-week low of $23.37, but well below the high of $93.57.
In October, the company reported quarterly revenues of $440.6 million. NewMarket has a very healthy current ratio of 2.66, with $529 million in current assets and $213 million in current liabilities. Its debt-to-equity ratio is also favorable, at 0.66.
The company operates in a highly competitive and mature global petroleum additives market segment, and Standard & Poors has said that the company has significant exposure to fluctuations in the cost of its raw materials.
On the positive side, S&P notes that the company occupies a strong position in its niche product lines, is relatively liquid and has excellent technological capabilities. These capabilities allow the company to develop products that meet or exceed the high performance requirements of its customers and regulators.
NewMarket also benefits from excellent patent protection and wide geographic diversity.
Consumer interest in NewMarket products are minimally affected by the current global economic conditions. Consumers are delaying the purchase of new or newer autos, and the need for additives and lubricants increases in aging vehicles.
While the credit is thinly traded in the public market, the patient investor will be well rewarded for waiting.
At current levels of return there is substantial value in holding NewMarket bonds. The price has clearly been impacted more by general market conditions than the creditworthiness of the name.
The opportunity for upside changes in the price upon a return to normalcy in the market could be substantial.
Jamie Dlugosch is a contributor to InvestorPlace.com. James F. Dlugosch contributed to this article.
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