It looks like we are going to have another market sell-off today. Most of my portfolio is in cash, gold mining stocks, big tech (Apple (AAPL), Microsoft (MSFT), Intel (INTC), etc..) and high dividend stocks. Now may be the time to start to move outside these groups and pick up stocks that are now cheap. One I like here is Chicago Bridge and Iron (CBI).
Chicago Bridge and Iron provides engineering, procurement and construction solutions, as well as process technologies for energy infrastructure projects. It primarily focuses on projects related to oil and gas companies. CB&I operates in approximately 70 countries worldwide, principally in the United States, the Netherlands, Canada, the United Kingdom, the Pacific Rim, South America and the Middle East.
Five Reasons to Own CBI at $32 a Share:
1. It is in the bottom quarter of its five year valuation range based on P/E, P/B and P/CF.
2. CBI has grown its earnings at over 16% annually on average over the past five years despite the economic challenges domestically. It currently sells for a five year projected PEG of approximately .9.
3. After a pullback of approximately 25% over the last few weeks, CBI is selling near medium term technical support (see chart).
Click to enlarge
Click to enlarge
4. CBI’s customers are energy producers which should have plenty of cash flow to continue to invest in the infrastructure projects CBI builds.
5. CBI has beat earnings estimates three of the last four quarters and consensus EPS for 2011 and 2012 has gone up over the past three months. It sells at a cheap 11 times next year’s projected earnings.
6. At under $33, Chicago Bridge and Iron is under several analysts’ estimates. Credit Suisse has a price target of $52 on CBI, Barclays is at $46 and S&P has a price target of $50 on the company.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CBI over the next 72 hours.