GEORGE SCHWARTZ
PRESIDENT
SCHWARTZ VALUE FUND

COMPANY: Lifetimes Brands
TICKER: LCUT (Nasdaq)
PRICE: $26.74 (as of 4 p.m. yesterday)
52-WEEK RANGE: $14.35-$27.36
MARKET CAPITALIZATION: $346.5 million

George Schwartz is the president of the Schwartz Value Fund (RCMFX) with more than $70 million under management. Lifetime Brands designs, manufactures, and distributes a variety of consumer products nationwide. Mr. Schwartz spoke to David Dalley of The New York Sun about why he thinks the company’s stock could double in value over the next three to four years.

What does Lifetime Brands do?

They’re a designer, marketer, and distributor of household products, tools, gadgets, and small appliances. They sell them under numerous names, including KitchenAid, Farberware, Cuisinart, Hoffritz, and Pfaltzgraff. Most of their stuff is kitchen-related. They’re the biggest player in their little niche, although they’re not a big company. They have only about $300 million in sales.

Why do you like it?

It’s an unusual company, and it’s relatively unknown, so the stock sells at a low price in relation to its earnings and dividends. It’s growing rapidly, at about 15% to 18% annually [in earnings]. Sales growth will probably be about 14% to 15% per year for the next few years. It’s a $26 stock selling at about 16 times this year’s earnings, and 13 times next year’s, which isn’t high. We think they’ll earn over $2 a share.

They also have extremely good management. They’ve made selective acquisitions over the years, and we expect that to continue. Their products are almost all made in China or Taiwan and they’ve really mastered the art of offshore manufacturing, and in-house product development, which improves profitability.

What’s the stock worth?

I think it can double in the next three to four years. It could be a $50 stock in that time. And there’s very little downside risk because of the low valuation.

Why is now the time to buy?

It’s fundamentally undervalued but it is also a long-term play. We own it in the Schwartz Value Fund. We expect it to perform very well, and it’s one of our larger holdings. We have a lot of confidence in the management and in future earnings growth. I’ve visited with the management team in the last month in New York and I’m very confident that they’re on the right track. They know what they’re doing, and they have a very well-oiled machine.

What’s driving growth?

As they reach critical mass, they’re starting to get more and more acceptance in the marketplace. It’s not just JC Penney asking for their products now, but also Home Depot, Lowe’s, and Wal-Mart, among others.

Acquisitions, continued development of new products, and increased efficiency gains from innovative product development and manufacturing processes will also drive growth going forward.

What are the risks?

They could make a bad acquisition. They took on a fair amount of debt to buy Pfaltzgraff, and they’ve been paying it back fast, but if they bought a real turkey and went into debt, then that’d be a problem.There’s also some risk associated with the offshore manufacturing process but nothing serious. They enjoy very strong relationships with the Chinese and Taiwanese entities that produce for them.