Compounding Machine Hiding in Plain Sight

“I would try and know everything about everything small, and I would find something.” - Warren Buffett

• Capital Allocation Machine—Buys niche industrials at 6-8x FCF

• 73 % Insider Ownership—Incentives aligned with shareholders

• Illiquidity Discount—10x vs. 27x peer EV/FCF

When thinking about where a small investor can have an edge, it’s often easier to invert the question: where don’t you have an edge? The answer is straightforward — you’re unlikely to gain any meaningful advantage analyzing the most visible, most liquid companies. Everyone is watching them, including institutional investors with better data, faster access, and deeper resources.

But when you look in the opposite direction — toward companies no one is talking about, that trade infrequently, with limited float or obscure listings — you start to find places where institutional capital can’t or won’t go. These are the overlooked corners of the market where research still creates alpha, and where investors can find opportunities hiding in plain sight.

Crawford United’s (henceforth, “Crawford”) shares trade over-the-counter (OTC) with very low daily volume—often just a few hundred shares per day. In late 2016, after years of business stagnation, new CEO Brian Powers pivoted the company from a struggling automobile parts business to a serial industrial acquirer. Crawford became a compounding machine by earning high returns on capital and reinvesting those returns into further acquisitions. The results speak for themselves: Shares have increased 24-fold, and EPS has grown 8-fold.¹

“We’re looking for companies that are the best at what they do. If they’re not the best at sales or accounting, we can teach them how to manage capital, labor, or expenditures, but what we can’t teach is how to make great stuff. If they can do that, we can help fix the rest.”- Brian Powers, CEO

100+ Year History

1910: Founded as Hickok Inc., revenues shrunk to $5M by mid-2010s.

2015: New leadership team, led by Edward F. Crawford and Brian Powers, initiated a successful pivot to acquiring niche industrial businesses.

2016: Acquired Federal Hose, launching the Industrial & Transportation Products segment.

2017: Acquired Air Enterprises, forming the Commercial Air Handling Equipment segment.

2019: Renamed Crawford United, reflecting new strategy.

Current Structure (two segments):

• Commercial Air Handling Equipment – custom HVAC units

  • Higher margin, growing organically, industry tailwinds, one year backlog

• Industrial & Transportation Products – hoses, aerospace parts, and other niche manufacturing businesses.

  • Lower margins, leaning into aerospace and defense

Business Model

In addition to investing in public markets, I spend time browsing Bizbuysell.com, looking for niche local businesses. I'd love to buy a great business with sticky cash flow—but great businesses don’t come looking for me. However, they do come looking for Crawford. In a 2022 interview (I’d highly recommend reading), CEO Brian Powers revealed they vet a few acquisition opportunities each week, typically acquiring 1–2 businesses per year.

Crawford operates a decentralized holding-company model with a light touch, unlike the heavy oversight typical of private equity. Owners of these small, close-knit businesses prize continuity; they want a buyer who will safeguard the culture and reputation they’ve built. Much of the value of these businesses rests on long-standing customer relationships—a strength best protected when employees are treated as partners, not costs; people who feel valued are far more likely to nurture those relationships and sustain the business over the long run.

Powers says after acquiring a business: “I may have preconceived notions of what needs to be changed, but maybe I’m wrong. Maybe it’s something else. So, we leave it in its current state for six months and work with the management team to understand the business.” Powers asks people at all levels within the acquired business: “How would you grow the company if you owned the place?”

Brian Powers continued: “They stay on their own ERP system, they keep their own name, their management team stays in place. That’s part of our value proposition, by the way—we’re not going to change those things. Companies get too hung up on integration, when you should only worry about operations.”

Capital Allocation Flywheel

Shareholder value grows when capital earns more than it costs. Crawford does this by buying industrial businesses at low multiples, then recycling the resulting cash flow—plus modest, low-cost debt—into additional deals.

Each acquisition is financially accretive and widens Crawford’s vendor-customer network, surfacing new targets. The result is a flywheel: more cash, deeper market insight, and a pipeline of opportunities.

Rahn Industries showcases Crawford in action. For $13M, Crawford acquired its largest HVAC-coil supplier, a company doing roughly $18M in annual sales. Rahn should generate about $2.7M in cash flow (15 % margin, author estimate)² or 20 % return on investment before any synergies or growth. The deal surfaced through Crawford’s own operating network, highlighting how each purchase helps feed the next.

Management

Assessing management is difficult. I focus on three things. The first is insider ownership. Incentives drive behavior; all else equal, I’d much rather management and board members own a considerable amount of the stock I am buying as opposed to large cash compensation packages or stock options. In this vein, I am encouraged with the high level of insider ownership. Powers annual salary + cash bonus ($750K) is significantly smaller than the roughly $4M (2.8 % of shares outstanding) worth of stock he owns. He is incentivized to continue compounding his equity. The chairman is eponymous director Edward Crawford who together with his son and trusts own 70+ % of total shares outstanding.

Second, I consider what management has said about the business and whether their view of its key drivers makes sense. Crawford’s team sees the company as a capital-allocation vehicle, a strategy they’ve executed consistently since 2016—and one they previously honed at Park-Ohio, run by Matthew Crawford (with Edward Crawford still chairman). Hickok reinvented itself by following the same playbook that grew Park-Ohio to roughly an $800M EV.

Because Crawford is far smaller, even modest acquisitions move the needle. Park-Ohio’s history shows what works—and what doesn’t—helping to de-risk Crawford’s path. Still, execution is critical: without multiple expansion, the company must keep sourcing and closing high-quality deals to sustain growth.

Third, how well has management executed on their plans? Steadily increasing earnings and margins showcase Crawford’s disciplined approach to acquisitions and great execution.

Valuation

Crawford trades at an EV/FCF of 10x. I reviewed 10 comparable companies³ whose primary business model is acquiring other businesses, and their median EV/FCF is 29x. Crawford likely trades at a discount due to its illiquidity; average daily trading volume over the past year was only about 1,500 shares, making institutional ownership untenable given the small float.

If Crawford traded at 20x EV/FCF (a 31 % discount to peers), the stock would be ≈ $94. Eventually, the company could close the valuation gap by up-listing to the NASDAQ or NYSE which would require increased liquidity, allowing more investors the ability to purchase shares, likely pushing the valuation higher. Consequently, the company would have an easier time buying back shares if the valuation discount persisted.

Outlook

It seems reasonable to expect Crawford to continue making one or two accretive acquisitions per year. They’re still small enough that acquiring a $10M business generating $2M in cash flow can boost earnings by over 10 %. Even without multiple expansion, as long as acquisition returns exceed the cost of capital, intrinsic value will keep compounding.

One last thought: Crawford acquires private businesses at very low multiples of FCF, probably around 6–8x. These small companies are entirely illiquid, which explains the lower multiples. Crawford itself is moderately illiquid, trading at 10x. In contrast, more liquid, larger peers trade closer to 29x FCF. Couldn’t a larger, more liquid company replicate Crawford’s strategy by acquiring Crawford and benefiting from the same multiple arbitrage?

Further Reflections / New learnings

Initially, I noticed that 2022 was a strong year for Crawford United, despite inflation, high interest rates, and poor public market sentiment. This led me to suspect that tough markets might actually play to Crawford’s advantage. In many industrial businesses, high fixed costs mean a temporary 10 % drop in revenue can cause a much larger hit to profits. Crawford, by acquiring businesses based on temporarily depressed earnings, can lock in much lower purchase prices. Operating leverage cuts both ways, when conditions normalize, earnings can rebound significantly. So what initially looks like an acquisition earning a 10 % return might actually deliver 20–30 % as profitability recovers—compounding Crawford’s intrinsic value over time.

I was listening to Constellation Software’s general meeting and Founder Mark Leonard offered a counter point to this contention. He says that owners of small businesses sell in good times, not downturns:

“I think if you parse our investments into 2 groups… when times are good, I think we're more likely to see generational sales of businesses that are small… When times are bad, they're much less likely to look for the onetime sale of the business they've spent their life building.”

In tough markets, the advantage shifts to buying large carve-outs:

“Where we do see advantage in difficult times is buying bigger businesses… carve-outs of larger businesses that are either suffering in tough times or have made decisions to go in a different strategic direction… one where if we're successful, it's because we have the opportunity to add value and not just buying something that's big and beautiful and has performed great.”

Takeaway: Large carve-outs, not mom-and-pops, may be cheaper in downturns.

Disclosure: I own shares of CRAWA. This article is for informational purposes only and is not investment advice. I may buy or sell at any time.

1. Stock price: $2 (2017) → $48 (2025) EPS: $0.46 (2017) → $3.83 (2024)

2. Author estimated 15 % cash flow margin.

3. Danaher (31.1×), Roper Technologies (29.9×), Fortive (19.8×), Illinois Tool Works (28.0×), Carlisle Companies (23.9×), TransDigm (54.9×), HEICO (50.9×), Teledyne (26.9×), Constellation Software (35.8×), Watsco (26.3×)