Yes, there are still companies out there delivering bang-up profits, and you'll find them in some surprising places. By Elizabeth Leary, Contributing Editor December 10, 2008 Scanning the newspaper headlines these days is enough to make you want to call in sick. Indeed, it's nauseating when stalwarts the likes of Merck are forecasting declining profits, or AT&T is announcing thousands of layoffs.They may be too small to make the paper, but there are still companies churning out eye-popping profits. Bob Auer looks for such companies for Auer Growth fund, which he co-manages with his father, Bryan. They won't even consider a company unless it's delivering at least 25% profit growth and 20% sales growth. Auer says the market is punishing companies that disappoint so brutally that executives are trying to temper expectations as much as possible. "If anything, most companies are understating their prospects now," Auer says. So when you find a company whose management is raising profit guidance and striking confident notes about the future, you might just have found a winner. He thinks he's found one with Intrepid Potash (symbol IPI), a fertilizer producer with a market value of $1.3 billion. Fertilizer stocks have tanked since June, partly on concerns of a global slowdown, partly on falling fertilizer prices and partly on moderating what had been overly exuberant profit forecasts. But Auer says that investors are underestimating Intrepid and that its prospects are much better than those of its bigger competitors. Advertisement Intrepid is unique in that it only produces potash, rather than diversifying among nitrogen and phosphate fertilizers. Chief executive Bob Jornayvaz pointed out in the company's last earnings call that, although prices for nitrogen and phosphate fertilizers have come down, "the price of potash is actually up and is stable." And, Jornayvaz said, the low prices of nitrogen and phosphate fertilizers, which complement rather than substitute for potash, mean farmers may have leftover cash, budgeted for fertilizers, to spend on potash. Jornayvaz also noted on the November 12 call that potash inventories are currently at 28-year lows. "We increased this stock from 0.13% to 4% of our portfolio after reading these comments," Auer says. Intrepid's profits are shooting through the roof. Third-quarter earnings per share of $0.66 were up 843% from the same period in 2007. And, although earnings forecasts for '09 have been falling, analysts are still looking for an increase of 69%, to $3.69 per share. Meanwhile, the stock, which traded as high as $76 last June, closed December 9 at $16.83. At that price, Intrepid trades at five times '09 estimates. The Denver company has no debt and $139 million in cash on its books. Consumers, who have been watching their home values and retirement savings plunge, don't seem to be in the mood to spend. So far, though, luxury denim has proved oddly recession-proof. True Religion's signature $200 jeans are sold in its own stores and in high-end department stores, such as Barneys and Neiman Marcus. "It's the jean," Auer says. "When Britney Spears pops out of her Mercedes, this is what she's wearing." Advertisement True Religion reported third-quarter sales of $79 million, 64% better than the same quarter of 2007. Profits of $0.64 per share were up by 73% and beat analyst estimates by 17 cents. The Vernon, Cal., company, which has a market capitalization of $331 million, is debt-free and sitting on $56 million in cash. It plans to open at least 20 new stores in 2009, which would bring its total store count to at least 61. And management recently upped its outlook for fourth quarter profits per share to $1.78, which would be a 53% increase from the year-earlier period. At $13.55, the stock (TRLG) trades for just seven times estimated 2009 earnings of $1.92 per share. It's down from $31 in mid September. With Detroit's big three begging for a bailout, you'd think anything within spitting distance of the auto industry would be struggling, too. But Titan International (TWI), which makes super-sized tires, primarily for agricultural and mining vehicles, is bucking the trend. The company earned $0.30 a share in the third quarter, compared with a 3-cent loss in the same period of 2007. Sales of $256 million were up 31% from the previous year. Advertisement Titan has made some wise investments, buying the oversized-tire businesses of Michelin, Goodyear and General Tire. The Quincy, Ill., company has also been renovating each of its production facilities and adding to staff. "You look at this and you think a rust-belt company that makes wheels would be dicey," Auer says. The stock has taken a beating since the summer, falling from $37 in late July to its December 9 close of $8.19. At that price, it sells for less than five times estimated '09 profits of $1.80 per share, up from an estimated $1.18 in '08. It's less surprising that infrastructure companies are holding up reasonably well now, given that President-elect Obama has said he wants to make big investments in the sector. Besides, many of the nation's bridges and tunnels need to be repaired, recession or no recession. Auer particularly likes Valmont Industries (VMI), an Omaha manufacturer of pipes and poles. Among other things, the company makes irrigation, lighting, and traffic-related structures. And each of its biggest customers-the federal government, farmers, utilities and state governments-are on steadier financial footing than most. Advertisement The business may be boring, but the profits are riveting. Valmont boosted sales by 33%, to $495 million, and profits per share by 41%, to $1.40, in the most recent quarter. At $58.28, the stock is down 51% from its June high and trades at 11 times estimated 2009 profits of $5.33 per share (analysts see $5.06 in '08).