My Top Trading Companies And Distributors Stocks For 2015 …
Summary
In this series of articles, I will be reviewing individual industry sectors and selecting my favorite stock picks for 2015.
For Part 52, I will be reviewing the Trading Companies & Distributors sector, taking a look at revenue/earnings growth and the overall financial stability of the companies.
Out of this group of stocks, my top picks for the remainder of the year are GATX and Rush Enterprises.
Overview
In this series of articles, I will be taking a look at various industry sectors and selecting what I believe will be outperforming stocks for 2015. In Part 1, I reviewed 47 stocks within the Aerospace and Defense industry sector. For part 52, in determining my favorite stocks in this sector for 2015, I will review the following Trading Companies & Distributors stocks:
AerCap Holdings (NYSE:AER)
Air Lease (NYSE:AL)
Aircastle (NYSE:AYR)
Applied Industrial (NYSE:AIT)
Beacon Roofing Supply (NASDAQ:BECN)
CAI International (NYSE:CAP)
DXP Enterprises (NASDAQ:DXPE)
Fastenal (NASDAQ:FAST)
GATX (NYSE:GMT)
General Finance (NASDAQ:GFN)
W.W. Grainger (NYSE:GWW)
H&E Equipment Services (NASDAQ:HEES)
Houston Wire & Cable (NASDAQ:HWCC)
Kaman (NYSE:KAMN)
Lawson Products (NASDAQ:LAWS)
MFC Industrial (NYSE:MIL)
MRC Global (NYSE:MRC)
MSC Industrial Direct (NYSE:MSM)
Rush Enterprises (NASDAQ:RUSHA)
TAL International Group (NYSE:TAL)
Textainer Group Holdings (NYSE:TGH)
Titan Machinery (NASDAQ:TITN)
United Rentals (NYSE:URI)
Watsco (NYSE:WSO)
WESCO International (NYSE:WCC)
Willis Lease Finance (NASDAQ:WLFC)
Step 1
The first step I took to narrow down the list of possible options was to look at the earnings over the past five years of these stocks within the industry sector. I removed the following stocks from further review because of their negative earnings growth over the past five years:
DXP Enterprises
Lawson Products
MFC Industrial
Titan Machinery
Willis Lease Finance
Step 2
I then took the list of remaining stocks and checked the revenue growth of each over the past two years. I am removing any stocks that had flat (less than 3%) growth or saw a decline in revenue over the past two years. These stocks include:
Houston Wire & Cable
Step 3
My next move was to examine the trailing PEG ratio of each of the remaining stocks. I removed any stock that had a PEG ratio over 2 to focus more specifically on fairly valued/undervalued stocks. These stocks included:
Air Lease
Applied Industrial
CAI International
Grainger
Kaman
MSC Industrial Direct
TAL International
Textainer Group Holdings
Step 4
The next set of data I reviewed was the Fundamental and Value Scores for each of the ten remaining stocks. These scores are calculated by YCharts and I have found them to be very useful when researching investment options. More details on each of the scores can be found here and here.
Fundamental Score
Value Score
AerCap Holdings
7
10
Aircastle
7
8
Beacon Roofing Supply
8
6
Fastenal
10
10
GATX
9
10
General Finance
7
10
H&E Equipment Services
5
10
MRC Global
8
10
Rush Enterprises
9
10
United Rentals
6
10
Watsco
10
3
WESCO International
9
10
To determine the best stocks for 2015, I’m only taking into consideration stocks that have values of 8 or higher for both fundamental and value scores. Doing this left me with the following remaining stocks:
Fastenal
GATX
MRC Global
Rush Enterprises
Wesco International
Step 5
My next step was to look at the book value of each company and to remove any stock that has seen a decrease in its book value over the past five years. However, none of the five remaining stocks had a decline in book value during this time period.
Step 6
I then looked at the remaining stocks and only included stocks with earnings yields of 6% or higher in my final analysis. The only stock out of the five with a yield below this is Fastenal.
Step 7
My next step was to look closer at each stock remaining that passed all previous criteria and determine whether or not there were any reasons to eliminate them as great stock candidates for 2015. In doing so, I reviewed the financials of each company, the most recent quarterly report transcripts and searched for any news items that warranted concern.
GATX
For its latest quarter, the company posted a 12% increase in revenue and an increase in earnings per share from $0.90 to $1.39 compared to the same period last year.
The company experienced an increase in fleet utilization from 98.5% to 99.3% and an increase in its Lease Price Index from 33.9% to 43.2%. The stock is attractively valued and with a decent dividend yield and growing customer demand, GATX has the potential to offer strong returns to investors.
MRC Global
For its latest quarter, the company posted a 2% decline in revenue and an increase in earnings per share from $0.23 to $0.28 compared to the same period last year.
While U.S. and International sales were up, Canadian sales saw a steep drop of 28% in sales for the quarter, mainly due to a decrease in customer spending and a weak Canadian dollar. By sector, Downstream sales were basically flat, while Midstream sales increased and Upstream sales decreased. A stall in its Upstream business, I believe, will prevent this stock from seeing significant price appreciation in the near term.
Rush Enterprises
For its latest quarter, the company posted a 24% increase in revenue and an increase in earnings per share from $0.30 to $0.41 compared to the same period last year.
The company continues to expand its network as it added additional centers in Ohio, Illinois and Texas the past quarter with plans for additional major projects in Texas, Ohio and Colorado later in the year. With an increased market reach, new products, and sales that have recently outpaced the industry, Rush Enterprises appears to be firing on all cylinders and I believe the company and stock will perform well throughout the remainder of this year.
WESCO International
For its latest quarter, the company posted a 1% increase in revenue and a decline in earnings per share from $0.97 to $0.90 compared to the same period last year.
The weak performance caused the company to lower its full-year outlook, expecting flat revenue growth for the year due to reduced demand and foreign exchange headwinds. Even though the company continues to grow through acquisitions and is currently attractively valued, I don’t believe that the company’s upcoming quarterly results will result in any positive momentum for its stock in the near term. While the stock remains an option as a long-term value play, I don’t see much potential for short-term success with the stock right now.
Conclusion
Out of this group of stocks, my top picks are GATX and Rush Enterprises. Both stocks are attractively valued based on historical PE ratios, both stocks have had successful recent quarters, and both stocks have seen the highest recent revenue and earnings growth over the past few quarters.
GMT Revenue (TTM) data by YCharts
GMT EPS Basic (TTM) data by YCharts
Both companies appear to be growing their business even when the market sector is struggling. I feel that the both stocks are poised for significant returns in the near term, as I believe both companies will continue to display solid quarterly results in the upcoming quarters. In addition to the short-term potential, these two stocks remain solid long-term options as well, with both of them having significantly higher returns over the past several years compared to MRC and WCC.
GMT data by YCharts
For part 53 of this series, I will be reviewing the Water Utilities industry. As always, I suggest individual investors perform their own research before making any investment decisions.
Source:
My Top Trading Companies And Distributors Stocks For 2015
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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My Top Trading Companies And Distributors Stocks For 2015 …
