As the stock market moves ever higher, I'm continuously looking for value stocks that have been left behind, perhaps erroneously. My latest search has uncovered a diverse group of industrial stocks, many of which are trading well below levels they first hit in early 2011. Since that time they have struggled with various headwinds, including the recession in Europe, the slowdown in the emerging markets and weakness in mining and commodities.
Nonetheless, the turnaround stock picks I uncovered enjoy solid core businesses, often with leading market share and powerful brands. As a result, they all stand to prosper as the global economy gradually improves. In addition, many of them have decent dividends to compensate you as you wait for a rebound. My contrarian investing newsletter names ten industrial turnaround stocks, three of which are detailed here:
Briggs & Stratton (BGG) is the world's largest producer of gasoline engines for outdoor power equipment. With Europe accounting for about 30% of sales, the slowdown there has hurt results. The company has made some management changes that should enhance profitability as its markets improve. In addition to the glimmerings of new growth in Europe, the rebound in the U.S. housing market bodes well for the company's future.
Caterpillar (CAT) is the world's leading manufacturer of construction and mining equipment. While its size provides barriers to entry and brand awareness, the company has been susceptible to the weakness in certain geographic areas and industrial segments, particularly mining. Nonetheless, Cat is well positioned to participate in renewed global growth. Its financials are outstanding, and management has recently repurchased $2 billion in stock, raised the dividend and lowered the company's debt ratio. Caterpillar should build plenty of value for patient investors.
Expeditors International of Washington (EXPD) provides logistics services that include freight consolidation and forwarding, vendor consolidation, customs clearance, cargo insurance and other value-added services. Revenues and earnings have been flat for the last couple of years as the slowdown in several parts of the world has hurt shipping volume. However, management recently reported that conditions are improving, and it appears that they have been able to capture market share. The financials are rock-solid, including a debt-free balance sheet.
Can Industrials Provide the Heavy Lifting a Portfolio Needs?
Market Cap. Bil.
Price To Sales
Briggs & Stratton
** Dividends are variable and do not reflect potential withholding taxes