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Current commodity movements and fluctuations in both equity and commodity markets certainly make it difficult to get your mind together and play the best trade. As a trader and investor, we must remember that these stocks are nothing than mere representations of the underlying collateral we are trying to value.

At any given day, the price you see on the ticker is the full value of the company that day, that minute, that moment. Whether or not it is really the true value is irrelevant to the situation and demands of being a market participant. Moreover, such an environment is where we must center our focus and place our trades with the best representations of collateral there are. Do not try and feel an affection for these electronic symbols. They are merely the product and means to your end.

So what makes North American Galvanizing & Coatings (NGA) so appealing? Let's go through this trade rationale and the economics behind the decision:

What does it do?

North American Galvanizing & Coatings, Inc., through its wholly owned subsidiary, North American Galvanizing Company, engages in the hot dip galvanizing and coatings for corrosion protection of fabricated steel products in the United States. It offers metals corrosion protection for iron and steel products that are used in commercial, construction, and industrial markets.

The company also offers various coating services, including sandblasting, chromate quenching, metalizing, centrifuge spinner galvanizing for small threaded products, and proprietary coating application systems for polyurethane protective linings and coatings over galvanized surfaces.

It serves various markets, including highway and transportation, power transmission and distribution, wireless and telecommunications, utilities, petrochemical processing, industrial grating, infrastructure, wastewater treatment, water storage and transportation, pulp and paper, pipe and tube, food processing, agricultural, recreation, and bridge and pedestrian handrail, as well as original equipment manufactured products, including general fabrication.

Both of these aspects provide much depth. In the analysis of the infrastructure market in the USA, the country would have to spend about $1.6 Trillion to repair the entire infrastructure (highways, transportation, bridges, etc.) according to the American Society of Civil Engineering (and as a former Industrial Engineer at Columbia University, in the city of New York, I will say they know their stuff). Transportation alone requires about $94 billion, and these numbers, by the way, are all conservative estimates (that is how engineers like to play. We like to underestimate and overcharge).

The rating for US infrastructure also ranked at about a D-. The American Society of Civil Engineers estimates that $1.6 trillion, as stated above, is needed over five years to raise the often aged U.S. infrastructure to "good" condition. Recently, and by overwhelming margins, the House of Representatives has endorsed two bills totaling about $10 billion to aid work on highways and bridges, initiatives included in ASCE's Action Plan for the 110th Congress.

So that is one aspect which provides strong economic and fundamental momentum for NGA, which serves these industries and will play a key role in insuring the repair jobs.

Another interesting aspect I find interesting is seeing NGA as the play on real estate. While mortgages and the finance aspect of real estate may be depressing home prices, the fact that you still need to prevent commercial buildings and products used in the structure itself from corrosion puts NGA as an end market-late cycle company that is best situated towards the end or past the peak of the real estate building boom.

Stock Growth:

This stock represents what I was discussing before: a strong company that remains largely overlooked and has a few smaller institutions covering the stock. (The company has 1 analyst covering, though nothing has been published in over a year.) What this allows for the trader is complete 100% catalyst to trade the company for more than 10 points. Typically, when one larger name firm initiates, you obtain 2 prominent names behind this, and a group of intermediate firms follow suite--each toppling the other for a higher price target in order to have the audacity to say "I told you so". So in terms of risk and reward, the trader has much to gain and several catalysts ahead of time.

Corporate Growth:

Recent performance suggests the firm is standing firm: Consolidated net earnings for the 2008 second quarter were $3.4 million ($.27 per share), compared with $2.2 million ($.17 per share) in the second quarter of 2007, a 59% increase in earnings per share. The company's net earnings for the first six months of 2008 were $6.5 million ($.51 per share), compared with $4.6 million ($.36 per share) in the first six months of 2007 which represents a 42% increase in earnings per share. Even in a declining commodity market, strong capital goods spending, including electrical distribution and highway projects which specify galvanized product, continued to support hot-dip galvanizing demand, which resulted in improved industry utilization rates.

This provided the opportunity to hold margins in a declining zinc markets.

Wrapping up:

I believe this trend is inherent and the sector (infrastructure finance/spending) has an immense amount of demand/need that NGA stands to profit from not only business momentum, but analyst catalyst momentum.

Stock position: Long.

Source: Above Average Returns with North American Galvanizing & Coatings