Since putting out my bullish piece on Allison Transmission (NYSE:ALSN) just under a year ago, the shares are up about 9.5%, outperforming the market by about 3%. Since then, the company has obviously published several financial statements, and the shares have risen and fallen in price. I thought I’d check in to see if it’s still reasonable to remain bullish on the name. In my previous article, I suggested people sell the November put with a strike price of $40. That was obviously a profitable trade, as the shares rallied into the fall. At the risk of spoiling the surprise, I’ll be suggesting a similar strategy today as I still like the shares a great deal. In spite of the fact that shares are nearly 10% higher now than they were a year ago, the company remains inexpensive in my estimation. I’ll go through my bullish reasoning below.
Company Background
I covered this much more extensively in my previous article on the company, but for those who are not aware of Allison Transmissions, they are the world’s largest manufacturer of fully automatic transmissions for medium and heavy duty commercial vehicles, and medium and heavy tactical defense vehicles. Although the company is truly global, fully 79% of their revenue is generated in North America.
The company’s transmissions can be found in a host of vehicle applications, as the company’s 100 different transmission models can be found in over 2,500 vehicle configurations worldwide. They build everything from on road commercial medium and heavy duty trucks, to off-road vehicles, to school buses, motorhomes, and defense vehicles.
Of greatest interest to me is the fact that the company dominates the electric hybrid market for transit buses in the world. Per the slide from the most recent investor presentation, the company has delivered approximately 9,000 units worldwide
