Wabash National (NYSE: WNC)

Another day, a new stock has caught my eye and I have taken a position. Wabash National Corp. (NYSE: WNC) at $15.01 per share. I bought a few shares and some of the July 2007 $17.50 calls/options.

This is likely not a home run, but Jeffrey Gendell, the same value investor who brought us (well me) the likes of CECE, ASTE, and IOSP (missed the boat on that one, though I did call it), has shown up by annoucing his 10%+ position last week and subsequently purchasing another 136,600 shares on the open market. His track record is strong and WNC appears it has an above average chance to reach $20-$25 in the next 6-12 months.

The company manufacturers truck trailers and more information can be found on their web site at http://www.wabashnational.com/.

The company has been out of favor, citing some tough times with getting enough supplies to fill orders, some costs to launching their new ERP system, and general market conditions.

Regardless, revenue for the company was up and it appears the bad news is already priced into the company.

Short and sweet, it seems that their new ERP program may alleviate some of the supply problems they have faced. They also continue to secure new accounts. Trucking is here to stay and demand will continue to be placed on this industry to deliver the goods and raw materials we use everyday. Furthermore, it appears that the company is well on its way to correcting some of their intrinsic problems they faced that led to this decline in overall income. The company trades at 1.6 times book value and 0.4 times sales, so there does appear there is some strong value to be had. The company also produces about $25M per year in free cash flow.

Again, this one is probably not a huge winner, but probably a relatively safe place to place your money and should yield a 50%+ return over the next 6-12 months. Plus, the fact that Gendell is loading up, and may continue to do so, is certainly a big plus. There is also a fair 1.2% dividend yield, though historically, it has been closer to 0.5% - so perhaps a double or even more is not out of the question.

Also, 10% of the outstanding shares are sold short - and with 12+ days on current average volume to fully cover those short positions, if the company does experience an upside, positive earnings announcement (which may be 2 or 3 quarters away), we could see return to a fair value and an additional boost from the short squeeze.

A similar thing appeared to happen to Powell Industries (NASDAQ: POWL) - another one of Gendell's holdings. Today, they announced strong upside earnings and the stock traded as high $29.39 before closing at $27.92 (up 16.7%). Part of the big gain was due to the surprise earnings and probably a fair portion was attributed to a short squeeze considering that not many shares are in the float and about 3% of their shares with a 9.9 short ratio (9.9 days to cover) was there.

Plus, WNC looks like it may benefit from what is called the January effect. Stocks that perform poorly during the year are often sold off in December to get some capital losses on a person's tax return. Often, people repurchase the shares sold off in the tax-loss selling in January, accounting for a burst upwards. That may or may not happen, but certainly a candidate to do so.

WNC is also well down from its January, 2004 highs of $30+ - partially attributed to how the high oil and gas prices impacted the transportation and trucking industry. With oil well off from its highs, appearing to stabilize, and the world getting used to $60+/bbl., business should very well start to flow again at WNC.

Double bottoms that occured in August 2006 also indicate that WNC is probably pretty close to the lower end of its trading range and likely is not going much lower than where it is today.

To sum up...

1. Most of bad news already priced in;
2. Gendell buying shares;
3. 10% of shares short - possible short squeeze on positive news;
4. Operational adjustments should help restore net income;
5. Great value at 1.6x book value, 0.4x sales, and $25M of FCF