Opinions
John O'Connell, CFA
Cummins
CMI-N
BUY
Jul 13, 2015
$131.490
Stock price when the opinion was issued
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BUY
He's a big believer in hydrogen fuel cells, a source of energy the world needs. CMI is one hydrogen company with real earnings that has invested heavily in hydrogen. They are a leading maker of truck engines. Also, they made a series of acquisitions in the past 5 years to build an impressive portfolio of hydrogen technologies, like the first hydrogen-powered train, airplane and fueling station and this year they build a device to cleanly extract hydrogen from water.
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BUY ON WEAKNESS
They reported a blow-out quarter, sending shares 9% higher. They beat revenues in 4 of their 5 largest divisions, boasted expanded marginsThey are part of the transition to nuclear energy, even though it will likely get less support under Trump, at a pace that will match customer needs. Also, he likes their power systems business (generators, commercial power systems for buildings), timely during the data centre boom. Caveat: While only 9% of their sales come from China, those could be hit by Trump tariffs.
INDUSTRIAL PRODUCTS
Very, very well-run company. Good track record of really good capital allocation. Trading at very reasonable multiples and very capital efficient. Good dividend which should grow over time. Have done a good job of expanding overseas. Considering the big drop off in heavy equipment manufacturing and purchasing, this has done an excellent job. Expanding well into China and India and picking up dealerships. You should have this in your portfolio.