Tickers in this Article: SSD, FAST, LOW, HD
Occasionally, a business comes along that doesn't appear to fit the mold of a bargain investment based on price, but it looks appealing from numerous fundamental angles. Such a situation exists with Simpson Manufacturing (NYSE:SSD) today. In such situations, investors should remember Warren Buffett's advice that it's far better to "pay a fair price for a great company than pay a great price for a fair company."

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Superior Management
You'd be hard pressed to find many businessmen with the quality and competency of Barclay Simpson, founder and chairman of Simpson Manufacturing. In a recent talk with analysts, Simpson pointed out that the company is "not focused on short-run profit," which he specified as being "two to three years." Very few managers think about the performance of business in this way.

Mr. Simpson thinks this way because he also owns 21.6% of the shares. He founded the company that bears his name in 1956, so he is clearly experienced in dealing with severe economic recessions.

Quality at a Fair Price
The company makes connectors that connect wood to wood and wood to other materials. Connectors are used to attach supplemental structures to houses, like decks and patios. SSD also makes steel connectors and, to a lesser extent, pre-fabricated walls. You can find its products across five continents and in stores like Lowe's (NYSE: LOW) and Home Depot (NYSE:HD).

Simpson has nearly 60% of the U.S. market for connectors, so the company isn't going anywhere. Its business environment is tough, but with guys like Barclay Simpson in charge, the company is in excellent hands. Like construction supplier Fastenal (Nasdaq:FAST), both companies stick to what they know best. (For more, check out Where Top Down Meets Bottom Up.)

A Solid Long-Term Play
And as a result, long-term investors have been rewarded. Investors often forget that a 13% annual return is not only excellent, but outperforms the majority of active pros. Business like Fastenal and Simpson could do just this, but investors have to be comfortable holding them during the worst of times. No one said investing was easy.

At the current share price of $26, Simpson has a market cap of $1.26 billion. With no debt and $170 million in cash, the enterprise value is just over $1 billion. Over the past 10 years sales have grown from $330 million to over $800 million while profits have more than doubled in that time. Over the same period, share count has barely budged, which is another indication that Simpson is a business run for the shareholders because it is owned by them.

Bottom Line
Measured against today's stock price and depressed earnings, Simpson doesn't appear cheap at all. To invest in this company you have to heed Simpson's focus on the real long-term. In 2006 this company earned over $100 million in profit. While this level of profitability might not be achieved this year or next, you have the kind of management in place that will likely figure out how to earn that figure when the opportunity is ripe. (For related reading, check out Why Warren Buffett Envies You.)

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