Value Find: Patrick Industries

Sizeable insider buying by a smart money hedge fund and a beaten-down stock price make Patrick Industries, Inc. (Nasdaq:PATK) a small-cap play worth putting on the radar.

Billionaire investor Jeffrey Gendell has made his fortune patiently making big bets in sectors when they are out of favor. As part of this strategy, his Tontine Capital hedge fund selectively invests in the private placements of small-cap companies. Tontine-led private placement homeruns in recent years have included Broadwind Energy, Inc. (OTCBB:BWEN), MISCOR Group Ltd. (OTCBB:MIGL), Exide Technologies (Nasdaq:XIDE) and Matrix Service Co. (Nasdaq:MTRX). Given this record, Tontine’s recent increased bet on Patrick Industries, a manufacturer of component products and a distributor of building products serving the recreational vehicle (RV), manufactured housing and industrial markets, caught my eye.

Near the end of June, Patrick completed a previously announced Tontine-led rights offering and standby purchase agreement at a price of $7 a share. In total, the rights offering and standby purchase agreement raised gross proceeds of nearly $13 million. Since the start of 2008, Tontine has now pumped nearly $20 million in cash into Patrick, boosting its stake in the $67 million market capitalization company to 57%. This continued vote of confidence by Tontine in Patrick comes in the face of the company’s stock having been walloped over the past year. At Monday’s closing price of $7.30, Patrick shares have tumbled over 50% from the $17 they fetched last July.

In May 2007, Elkhart, Ind.-based Patrick acquired rival Adorn, a manufacturer and supplier of interior components to the RV and manufactured housing industries, for nearly $79 million in cash. This acquisition virtually doubled Patrick’s manufacturing sales volume and significantly increased its market share. Since closing the Adorn deal, Patrick has focused on consolidating overlapping facilities to boost capacity utilization and improve operating efficiencies. This integration activity has come at a dicey time for Patrick with the housing industry in a downturn and RV sales suffering . . .

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