Unlocking Value in Harold Simmons’ Empire (VHI, KRO, NL & CIX)

Dallas billionaire Harold Simmons died over the weekend with investors sending shares of some of his publically traded companies like Valhi, Inc (NYSE: VHI), Kronos Worldwide, Inc (NYSE: KRO), NL Industries, Inc (NYSE: NL) and CompX International Inc (NYSEMKT: CIX)to higher levels as they anticipate changes – such as asset sales or spin offs. Harold Simmons was the embodiment of the American dream because he was born during the depths of the Great Depression in Golden, Texas to schoolteacher parents and he spent his early years living without indoor plumbing or electricity. However and by recognizing underpriced assets and through the use of massive amounts of leverage (e.g. junk bonds), he built an empire and ranked #40 on the 2013 Forbes 400 with a fortune estimated to be worth some $10 billion.

Besides his success story, a Forbes article about Harold Simmons' death also noted that he will be remembered for three more things:

His investments in old-line "dirty" industrial conglomerates along with a controversial Texas nuclear waste dump. His deep philanthropy. His funding of GOP politicians – especially his $4 million funding of the Swift Boat attacks on Senator John Kerry. He also told the Wall Street Journal in an interview that Barack Obama is "the most dangerous man in America" because he wants to "eliminate free enterprise in this country."

Given that the death of Harold Simmons is bound to impact the publically traded companies in his empire, here is what investors or would be investors in them need to know:

Valhi, Inc. A Delaware corporation that has operations through majority-owned subsidiaries or less than majority-owned affiliates such as NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc. and Waste Control Specialists LLC, Valhi, Inc operates in three market segments: Chemicals, Component Products and Waste Management. More specifically, Valhi, Inc's non publicly traded Waste Control Specialists LLC owns a controversial 1,338-acre Texas facility near the New Mexico border that disposes of radioactive waste plus helps clean up Superfund sites – some of which resulted from the operations of the holding company's other entities. On Monday, Valhi, Inc only rose 2.15% to $15.23 (VHI has a 52 week trading range of $12.23 to $21.08 a share) for a market cap of $5.16 billion plus the stock is up 21.8% since the start of the year and up 236.95% over the past five years. Valhi, Inc has no P/E and a forward dividend of $0.20 for a 1.30% dividend yield.

Kronos Worldwide, Inc. Since 1916, Kronos Worldwide has been producing titanium dioxide pigments (TiO2), the world's primary pigment for providing whiteness, brightness and opacity. Kronos Worldwide also owns the world's largest mining operation of ilmenite, the raw material used for titanium products such as white pigment titanium oxide and titanium metal products. Citi analyst James Finnerty told clients in a note Monday that Kronos Worldwide could be a target for Tronox Ltd (NYSE: TROX) as the combined entity would account for 19% of global titanium dioxide capacity. Moreover, a buyout offer could be partially funded by a seven-year $1.5 billion term loan that Tronox Ltd secured in March, with around $700 million used to pay down existing debt. On Monday, Kronos Worldwide rose 7.96% to $18.58 (KRO has a 52 week trading range of $14.44 to $20.52 a share) for a market cap of $2.15 billion plus the stock is down 4.7% since the start of the year and up 273.1% over the past five years. Kronos Worldwide has no P/E and has a forward dividend of $0.60 for a dividend yield of 3.5%.

NL Industries, Inc. A diversified holding company, NL Industries conducts its component products operations through its majority-owned subsidiary, CompX International Inc, and it owns a significant interest in Kronos Worldwide, Inc. On Monday, NL Industries jumped 9.11% to $11.02 (NL has a 52 week trading range of $9.96 to $13.59 a share) for a market cap of $536.39 million plus the stock is down 3.8% since the start of the year and down 11.6% over the past five years. NL Industries has no P/E and a forward dividend of $0.50 for a 5% dividend yield.

CompX International Inc. A diversified manufacturer of engineered, quality components, CompX International operates through two business segments: CompX Security Products (which is the manufacturing umbrella for the former National Cabinet Lock, Fort Lock, Timberline Lock and Chicago Lock) and CompX Marine (which manufacturers headers, tailpipes and exhaust systems). On Monday, CompX International rose 1.18% to $12.85 (CIX has a 52 week trading range of $11.00 to $19.20 a share) for a market cap of $159.30 million plus the stock is down 7.4% since the start of the year and up 145.7% over the past five years. CompX International has a trailing P/E of 4.78 but no forward P/E plus a forward dividend of $0.20 for a dividend yield of 1.60%.

Finally, here is a quick look at the investment performance of all Harold Simmons' publicly traded companies:

As you can see from the performance chart, the performance of Valhi, Inc , Kronos Worldwide and CompX International Inc have largely been flat for the past two years while the performance of NL Industries has been subpar since the financial crisis. In other words, there outside investors have plenty of reasons to hope for change and some unlocking of value from Harold Simmons' empire.