Why I'm Holding On to Chicago Bridge & Iron

 |  Includes: AMFW, CBI, FLR, JEC
by: Mark Riddix

In December of 2009, I wrote a post about my investment in Chicago Bridge & Iron (NYSE:CBI). CB&I was one of my Favorite Stocks For 2010. I trimmed my position a little in March to take some profits but still hold the majority of my position. Today, I want to take a look at how my investment in CB&I has performed over the past 11 months.

I started my position at $18 and bought shares all the way up to the $20 level. My average cost was $18.90 for my shares. Today, the stock currently trades at $24.50. My total gain is 29.6%. That’s not bad for a company that generates its profits off of industrial production. Everyone knows that industrial production has been dormant since 2008.

Chicago Bridge & Iron is one of those companies that flies below Wall Street’s radar. It’s a midcap stock with a $2.4 billion dollar market cap. Fluor (NYSE:FLR), Foster Wheeler (FWLT), and Jacobs Engineering (NYSE:JEC) garner all of Wall Street’s attention when it comes to infrastructure stocks. Chicago Bridge & Iron has outperformed all of these firms over the past year and there should be more growth to come.

Would I buy shares of CB&I at the current level? No, I would not. It’s not expensive at $24.50 but it isn’t exactly dirt cheap either. I am comfortable buying Chicago Bridge & Iron up to$24 per share. I do not want to pay more than 10.5 times next year’s earnings for the company.

I will continue to hold my investment in CB&I and look to add to my position on pullbacks. The company’s P/E ratio and PEG is subsstantially lower than competitors. Throw in the solid balance sheet and you can see why I am a fan of Chicago Bridge & Iron. The company stands to benefit from any uptick in industrial construction in global economies.