Watch for the value. Watch for the cash flow. Watch for lowered expectations that are achievable at a reasonable valuation. Keep a look out for the names, well known, and otherwise, that can potentially benefit from increased U.S. infrastructure spending.
Many of the bigger winners in this market, to date, are found in the guts, not in the headlines.
We hear all too much of Action Alerts PLUS charity portfolio holding Apple (AAPL) and the lack of meaningful updates to the iPhone. We hear of SAAS, and, the next big social media acquisition. Could it be Yelp (YELP) or Twitter (TWTR) that Google (GOOGL) decides to buy?
Nobody speaks of Valmont Industries (VMI), a leader in irrigation equipment as well as lighting and utility poles. But its shares are approaching two-year highs. It's a company that is as solid and white-bread as many in the Midwest. Yet it remains a cash-flow machine, and is trading at a reasonable valuation. And then what about Valmont's duopolistic sister, Lindsay Manufacturing (LNN), trading sideways at $70 for the better part of six months, and 22% below the 52-week high?
What about Martin Marietta Materials (MLM), the U.S. aggregates giant, and its competitor Vulcan Materials (VMC)? Both are trading at all-time highs and enjoying solid pricing and demand. Or perhaps a smaller cap name such U.S. Concrete (USCR) is worth a look?
And then there's housing. Sure, we like Sherwin-Williams (SHW) and Mohawk Industries (MHK). Everyone does. They are staples in many quality portfolios. But Mueller Water Products (MWA), Owens Corning (OC), Pool (POOL) and SiteOne Landscape Supply (SITE), are cheaper plays on more or less the same theme.
Everybody loves electronics and infrastructure. Just check out the continued strength in Acuity Brands (AYI) and Littelfuse (LFUS). But nobody talks about Chase Corporation (CCF), a maker of wire wraps, or Anixter International (AXE), a distributor of electrical and utility products.
There are the haves and have nots in every micro subsector. Eventually, should fundamentals continue to improve ¿ and yes, I said improve ¿ then perhaps smaller, lesser-known laggards could be the better ways to participate in this stealthy tape.
Just because they are smaller or lesser known doesn't mean they are of lower quality. Leaders can be found in some uncommon places in this market. There is money to be made.
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