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Industrial Investment Ideas
#1
My newest installment has been posted on Seeking Alpha for some ideas in the Industrial Sector. Hope you enjoy.

http://seekingalpha.com/article/2108513-...ndustrials
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#2
Another good one, Eric.

AOS has intrigued me for a while. If it weren't for the low yield, I'd be looking more closely. I especially like to find companies that have performed well that are under the radar.

LMT is on my wife's watchlist but damn if it doesn't just keep moving up. Sometimes cash and opportunities just don't line up.

It's getting tough to find something in most sectors today, isn't it?
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How do they get the deer to cross at that yellow road sign?

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#3
(03-26-2014, 10:49 AM)Dividend Watcher Wrote: Another good one, Eric.

AOS has intrigued me for a while. If it weren't for the low yield, I'd be looking more closely. I especially like to find companies that have performed well that are under the radar.

LMT is on my wife's watchlist but damn if it doesn't just keep moving up. Sometimes cash and opportunities just don't line up.

It's getting tough to find something in most sectors today, isn't it?

This is the first time I've looked into AOS and it looks like a solid company. Fairly valued here but you have to love the growth rate.

LMT is a stock I bought in February of last year when it was knocked down due to sequester/budget talks and I'm now sitting on a 90%+ gain. It still looks like a good long term hold at these levels.

It is getting difficult to find enough stocks to make the list. Both the Health Care and Industrials there were some decent ideas but nothing that jumped out as being a huge deal.

I narrowed down the list for tech stocks last night and think I found 5 for the article, but again there aren't too many deals out there. Mostly large cap cash cows as the small cap high growth stocks are all overvalued.
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#4
Back in June I was trying to decide between Cummings and John Deere. I unfortunately went with Deere. I guess that's how it goes sometimes.
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#5
(03-26-2014, 11:28 AM)Jason Wrote: Back in June I was trying to decide between Cummings and John Deere. I unfortunately went with Deere. I guess that's how it goes sometimes.

I own both! I guess I'm 50% happy. Tongue

I actually debated between CAT, DE, and CMI when I built my portfolio last spring and went with DE and CMI. I've since added to my DE position on its weakness and think it will do fine in the long run.

I'm currently about dead even on the stock after owning it for a year. Its trading under a 10 PE, which I expect will continue until it turns the corner and projects new growth in earnings. I plan on holding for a few more quarters to see how the trends are looking and then may revisit at the end of the year if I see better opportunities for my capital.
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#6
(03-26-2014, 11:40 AM)EricL Wrote:
(03-26-2014, 11:28 AM)Jason Wrote: Back in June I was trying to decide between Cummings and John Deere. I unfortunately went with Deere. I guess that's how it goes sometimes.

I own both! I guess I'm 50% happy. Tongue

I actually debated between CAT, DE, and CMI when I built my portfolio last spring and went with DE and CMI. I've since added to my DE position on its weakness and think it will do fine in the long run.

I'm currently about dead even on the stock after owning it for a year. Its trading under a 10 PE, which I expect will continue until it turns the corner and projects new growth in earnings. I plan on holding for a few more quarters to see how the trends are looking and then may revisit at the end of the year if I see better opportunities for my capital.

S@p Capital thinks that Deere will underperform in the next couple of years due to a slow down in farm equipment. However they have fair value at $102. So it's either a dead horse for awhile or an opportunity to reinvest divi's at a lower price.

The dividend growth for Cummings has been fantastic by the way.
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#7
Don't forget their buyback program, they have $8B available under the program on a $33B market cap.

Pg 15 of the investor presentation.
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#8
(03-26-2014, 12:54 PM)EricL Wrote: Don't forget their buyback program, they have $8B available under the program on a $33B market cap.

Pg 15 of the investor presentation.

If they do struggle in the next couple of years I wonder if they will be
willing to increase the payout ratio. Right now it looks like they want to keep it around 25 to 35%. Looks like the share repurchase is cyclical as well.
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#9
(03-26-2014, 01:15 PM)Jason Wrote: If they do struggle in the next couple of years I wonder if they will be
willing to increase the payout ratio. Right now it looks like they want to keep it around 25 to 35%. Looks like the share repurchase is cyclical as well.

That's because the whole business is cyclical, IMO. I doubt very much they'll boost the payout ratio. During the last 2 recessions earning were cut about in half. If that happens again, the payout ratio will be closer to 50-60% at today's indicated dividend rate.

I'm looking out 5 years and beyond so what happens over the next couple years does not concern me that much. When I purchased my stake, I expected 2013 to be the peak year and then drop for the next 2-3 years. Five years out, however, the growing population and rising middle class in the underdeveloped world are going to be clamoring for food. DE could be right in the middle of productivity gains in the ag field if management plays their cards right. CMI could also be a beneficiary of some of that.

CAT & CMI could benefit more from infrastructure buildout worldwide and rebuilding in the US if our politicians keep ignoring the crumbling infrastructure as they're doing now. However, this could take time to play out.

In the meantime, I'll just watch and reinvest. Not purchasing any more at these levels but may add during the expected dip.
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How do they get the deer to cross at that yellow road sign?

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#10
Industrials has the smallest allocation in my portfolio and I desperately need some exposure there. I had DE in my watchlist over the last few months, but decided to drop it as I read more about it - the fact that they decided to increase their buyback program instead of increasing dividends just didnt sit well with me.

I am now considering conglomerates (GE, UTX), ITW, PH. The defense sector looks like a good investment as well, but not at these levels. Waiting for a better entry point.
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