Flyover Stock: Miller Industries (MLR)
A dominant player in the towing and recovery equipment industry that could perform at a higher level.
Accidents happen on the road. Cars and trucks break down - sometimes in difficult to access places. Natural disasters leave trails of flooded or burned cars. Off-highway equipment needs to be moved to a job site.
In each of these situations, a specialized vehicle needs to arrive on the scene with towing and recovery capabilities to get the car, truck, or equipment safely to its next destination.
If you’ve ever watched a show like Ice Road Rescue (one of my son’s favorites) or seen one of these vehicles in action, you know that towing can be highly technical and require finely-tuned, heavy duty equipment to get the job done.
So I’ve enjoyed spending some time this month learning about Miller Industries, the world’s largest manufacturer of towing and recovery equipment.
Miller Industries has a classic Flyover Stock setup.
Non-obvious name: “Miller Industries” could be in any line of business.
Headquartered outside a major city: Headquartered in Ooltewah, Tennessee, a town of 700 people near Chattanooga, it is about 110 miles from Atlanta, the nearest major city.
Unglamorous work: Manufacturing towing and recovery equipment won’t capture the imaginations of Silicon Valley
Slow (but steady) growth: Over the last decade, Miller grew revenue, EBITDA, and net income at 8.2%, 11.4%, and 13.3%, respectively.
Low/limited analyst coverage: There’s typically one analyst on quarterly earnings calls.
Founded in 1990 by Executive Chairman William (“Bill”) Miller, Miller Industries aggressively rolled up fragmented towing and recovery equipment brands throughout the first decade, such as Holmes, Century, and Vulcan International. According to a 1997 article in Crain’s:
During a depressed market, [Miller] acquired three of the largest brand names in towing equipment manufacturing, two of them in bankruptcy, for $25 million. He consolidated operations, closed three of five plants, eliminated 300 overlapping distributors and standardized manufacturing operations
The company went public in 1994, and while the road has been bumpy at times, Miller is a market leader in an attractive niche with a clean balance sheet and an increased focus on shareholder returns via dividends and buybacks.
According to the AI-based Tenzing MEMO research platform (professional investors can sign up for a free trial here - use reference code FLYWITHUS to receive the extra 10% off your annual subscription), among the key themes to understand at Miller are regulatory challenges - particularly California’s Advanced Clean Technology (ACT) regulation, navigating inventory cycles, and supply chain and tariff management.
We’ll explore each of these issues, along with the regular 360-degree view of Miller Industries’ moat, management, forecastability, and valuation below.
Paid subscribers, your content continues below.
Todd Wenning is the founder of KNA Capital Management, LLC, an Ohio-registered investment advisor that manages a concentrated equity strategy and provides other investment-related services.
At the time of publication, Todd, his immediate family, KNA Capital Management, LLC and/or its clients own shares of Copart.
Please see important disclaimers.