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Here's Why Wabtec Belongs In Your Portfolio

William Bias profile picture
William Bias


  • Investing in the stock market represents the best route for an individual to become independently wealthy.
  • Buy companies that sit behind a wide moat and sell highly needed or wanted products.
  • Westinghouse Airbrakes Technologies sells needed parts and services in a crucial industry.

I love researching the stock market and have done so for 23 years since my sophomore year of high school. Also, I am fascinated by the fact that the stock market represents the best route to wealth for the individual. According to the website Moneychimp.com the stock market as a whole has given investors a compounded annual return of roughly 9% since 1871 when factoring in dividends.

During my time as a stock market researcher I have developed some principles to help me select publicly traded businesses to hold for the long-term. Let's take a look and see how one of my investment favorites, Westinghouse Air Brake Technologies or Wabtec for short (NYSE: NYSE:WAB), is doing.

Think like a business owner

I buy shares in publicly traded businesses with the intention of holding for decades. I don't like the word stock. I just view the stock market as a way to buy shares in excellent businesses and when the time does eventually come to sell then I can use that mechanism to sell those shares to someone else. Holding for the long-term can cut down on trading costs and taxes if held in a taxable account. In order to achieve this you need to buy companies that stand the best possible chance of growing and expanding. The stock market generally rewards companies that can expand their fundamentals over the long-term in the form of superior capital gains and dividend increases.

In order to achieve long-term fundamental expansion, a company needs to sell a needed or a highly wanted product with the former bearing less risk than the latter. It also helps if the company resides in a market leadership position, operates in an industry with high barriers to entry, and has a highly recognizable brand.

I also like to see

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author is long WAB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (8)

William Bias profile picture
No problem.

Thanks for reading.
PhilTCU profile picture
Thanks for the article. WAB is starting to look pretty interesting after the recent pullback. On my research list.
One thing I noticed in your presentation is that the earnings line for this company is far above the net income line so maybe the earnings are being managed in some way. I think it's a good post but you need to analyse the disconnect between earnings and revenues before you invest a significant amount of capital into this stock. I would also point to the other post on your article which indicates that high valuation which the market is placing on this business and perhaps wait for more favourable entry point into the stock.
William Bias profile picture
Thanks for reading brinsley!
GrahamValue profile picture
Benjamin Graham actually emphasized that the secret of sound investment was the "Margin of Safety". He recommended various categories of stocks - Defensive, Enterprising and NCAV - and specified precise qualitative and quantitative rules for each category.

Earnings power was one of the rules included in his investment framework.

For example, given below are the actual Graham ratings for Wabtec Inc (WAB), with no adjustments other than those for inflation.

Defensive Graham investment requires that all ratings be 100% or more.
Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

Wabtec Inc - Graham Ratings
Sales | Size (100% ⇒ $500 Million): 514.00%
Current Assets ÷ [2 x Current Liabilities]: 115.03%
Net Current Assets ÷ Long Term Debt: 167.36%
Earnings Stability (100% ⇒ 10 Years): 100.00%
Dividend Record (100% ⇒ 20 Years): 95.00%
Earnings Growth (100% ⇒ 30% Growth): 312.71%
Graham Number ÷ Previous Close: 36.92%

The Final Graham Assessment for Wabtec Inc is also given below.
The Quantitative Result (Intrinsic Value ÷ Previous Close) for a stock has to be 100% for true Graham investment.

Wabtec Inc - Final Graham Assessment
Defensive Price (Graham Number): $31.25
Enterprising Price (Serenity Number): $12.70
NCAV Price: $1.00
Qualitative Result: Good / Enterprising
Intrinsic Value: $12.70
Previous Close: $84.65
Quantitative Result: 15.00%

Since this is an Enterprising quality stock, the Intrinsic Value of this stock equals its Enterprising Price.
Similarly, the Intrinsic Value for a Defensive quality stock equals its Defensive Price (Graham Number), and the Intrinsic Value for an NCAV quality stock equals its NCAV Price.

Please note that not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

http://seekingalpha.co... shows how one can assess 5000+ NYSE and NASDAQ stocks by a similar exact Benjamin Graham assessment, with no adjustments other than those for inflation.
William Bias profile picture
Yeah the margin of safety is thin here given the inflated P/E ratio.

Thanks for reading.
Do you know why Bridgewater Associates used to have a position in WAB listed in their 13Fs a few years ago but no longer do ?
William Bias profile picture
No not really.
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