Stockchase Opinions

John O'Connell, CFA Cummins CMI-N BUY Jul 13, 2015

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.

$131.490

Stock price when the opinion was issued

INDUSTRIAL PRODUCTS
It's the ideal tool to help you make quicker, more informed decisions for managing and tracking your investments.

You might be interested:

WAIT

It is very cyclical and for some of them he thinks it is only mid way through the downturn. It is a good cash flow generator for sure.

WATCH

He is looking for what the tax policies are coming out of the Trump administration. If he offers accelerated depreciation then this one would benefit.

DON'T BUY

Industrials usually show strength from January to May, but CMI-N has shown weakness earlier than expected. This has him worried about this company and this sector as a whole. Technical support has been broken as well, so he would not buy this.

BUY
They're developing a hydrogen-based engine. It has good sales in China. He's feel good about this company is there was a roll-out of hydrogen fuel stations by an energy company. He prefers play e-cars this way.
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.
BUY

Formerly made dirty truck engines, but now make EV chargers. The new CEO revealed their new zero-emission mandate.

COMMENT

A great industrial company that yields almost 3%, but industrials are selling off now because of higher interest rates. Cummins will come back, but it will take time, because a slowdown is hurting the industrials more than any sector.

BUY
Will benefit from the Inflation Reduction Act's EV tax credits

A truck engine maker that has a subsidiary that makes hydrogen fuel cells. They're working on hydrogen-powered truck engines.

COMMENT

Industrials have outperformed the past few years. CMI's trucking has seen a modest improvement, but wants to see more. Earlier this year they went through a period of adjustment in freight.

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.