Warren Buffett, widely recognized today as one of the greatest investors of all time, got his tutelage under the teaching of Benjamin Graham â âthe father of value investing.â
While Graham preached the discipline of buying cheap stocks at a âreasonable margin of safety,â Buffett took Grahamâs teachings to another level.
Although Warren Buffett got his start, like Graham, by âpicking up cigar butts of the ground to get their lasts puff,â it wasnât long before he started taking a more growth-oriented approach.
One of the more famous examples of this is Buffettâs investment in the insurance company GEICO — a company now owned by Buffettâs Berkshire Hathaway Inc., the holding company that the âOracle of Omahaâ has grown to be worth $488 billion dollars.
GEICO was just the type of company that Graham didnât like and perhaps didnât quite understand.
Despite Grahamâs insistence that the stock was âtoo expensive,â Buffett went against his mentorâs wishes, accumulating a large position in the company and eventually buying it outright.
Sometimes stocks really are too expensive, and the price tag placed on them by the market just doesnât make sense and isnât worth paying for. However, in other cases, great or even excellent companies get valuations from the market that may appear to make them expensive but sometimes they turn out to be worth every penny.
As the saying goes, âyou get what youâre willing to pay for.â
Enter Intertape Polymer Group (TSX: ITP), a fairly small company by todayâs standards with a market capitalization just a little over $1 billion dollars.
But while Intertape Polymer may not offer the dirt-cheap valuation that Graham would likely want to see, it does offer certain qualities that more than likely would attract Buffett as an investor.
Itâs a business thatâs easy to understand
In its annual report, Intertape Polymer describes itself as a âleader in the development, manufacture, and sale of a variety of paper and film-based pressure-sensitive and water-activated tapes.â
The company makes it sound fancy — and maybe thatâs by design — but really, the company makes packing tape.
Itâs a business thatâs easy to wrap your head around — even if youâre new to investing — and itâs a business that has a decent future ahead of it, as more commerce shifts to online avenues that involve companies shipping product direct to consumers via mail and couriers.
A quality, growing dividend
The company is currently offering investors a dividend yield of 3.76%.
While thatâs not exactly a yield that is going to set your hair on fire, it is a respectable yield, and when you consider that the company has raised its dividend by, on average, 11.8% over the past three years, it only serves to make the dividend look that much better.
Itâs not expensive either
Despite a quality business with long-term promise and a healthy, growing dividend, Intertape Polymer stock remains very reasonably priced.
Granted, the stockâs price-to-earnings (P/E) ratio, at less than 13 times, isnât quite on the same level as, say, the likes of Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX), which is trading at a P/E of less than five times, the company still trades well below the average of the broader market by a considerable margin.
Bottom line
Last summer, Intertape Polymer announced the acquisition of Cantech for $67 million — a move which helped the company record an increase in revenues of more than 13% in the fourth quarter of 2017.
This is clearly a company that sees the opportunity in front of it and is making moves to secure itself — and its shareholders — a brighter future.
