Update Cummins (CMI)
Notice something about the U.S. economy?
Consumer confidence is plunging like a stone—in July the consumer confidence index fell to 50.4. That’s down from the 54.3 (revised) reading for June and the lowest reading since February.
But corporate customers are buying—servers, computer storage devices, trucks, whatever, especially if, because of the Great Recession, they had put off purchases for two or three years and if the new gear is more powerful, more energy efficient, more something than what it would replace. We’ve seen this in the earnings reports for the second quarter and in the guidance for the third quarter from Intel (INTC), and EMC (EMC), and from engine-maker Cummins (CMI). Read more
Update Cummins (CMI)
The growth thesis for heavy-duty truck sales continued to play out in May. Net orders climbed by 84% from May of 2009.
That growth thesis says that truck sales should boom in late 2010 and into 2011 as truck owners, who have put off buying during the recession, resume purchases driven by growth in shipping volumes, new government rules that require reduced pollution, and improved engine technology that increases performance and lowers operating costs.
More than 50% of orders for Class 8 trucks placed in May are scheduled for delivery in the third quarter, just in time to beat the surge in volumes that comes with the peak fall shipping season, according to ACT Research. In June the analyst of truck and commercial vehicle markets increased its forecast for heavy-duty truck production in 2010 by 23% over 2009 levels.
Orders for medium-duty trucks (Classes 5-7) were also up in May—by 33% from May 2009. Orders for these classes of trucks have been growing more slowly than for heavy duty trucks because end markets among home builders and highway construction contractors have been very slow to recover from the recession—and in many areas of the country aren’t showing any signs of recovery at all.
All this should help Cummins (CMI). Read more
Buy Cummins (CMI)
Way back on April 20, I said that I’d like to add shares of Cummins (CMI) to Jubak’s Picks. Well, the stock ran away from me, I mean really ran, before I could get in a buy. Now thanks to the European debt crisis the shares have given up all that gain and a little bit more. And I’m adding Cummins to Jubak’s Picks today, May 5.
As I wrote in my post “And now for the good news (on the U.S. economy anyway)” http://jubakpicks.com/2010/05/05/and-now-for-some-good-news-on-the-u-s-economy-anyway/ the U.S. economic recovery is on track for decent if not spectacular growth. In that environment I want to own growth stories where the basic underlying positives of the U.S. economy get a rocket booster blast from pent-up demand that has built up during the Great Recession. (For more on that kind of growth stock see my post http://jubakpicks.com/2010/04/20/go-for-the-growth-and-where-to-find-it-at-a-reasonable-price/ )
You can find examples of that throughout Jubak’s Picks: Intel (INTC) and Microsoft (MSFT) are good examples. Cummins is another. Read more
3 technology stocks in the hot industrials sector
Here’s a quiz? Name three technology companies that no one has ever heard of.
Apple (AAPL) is a great technology company. So is Google (GOOG). Cisco Systems (CSCO). Intel (INTC). And I’m sure that everybody would put them at the top of their list.
But how about these names? Johnson Controls (JCI)? Corning (GLW)? Cummins (CMI)?
Not at the top of your list of tech companies? Not surprising. Johnson Controls makes auto interiors, batteries, and air conditioning equipment. Corning makes glass. Cummins makes diesel engines for big rig trucks.
But even if you don’t think of them as technology companies—and the stock market doesn’t value them like technology companies—that’s exactly what they are. In fact, I’d argue that an engine-maker like Cummins is at least as much of a technology company as Cisco Systems, where the company’s success is built on technology, yes, but also on an industry-leading sales and marketing machine, or Intel, which is one of the world’s great manufacturing companies.
I’ve argued in other places—in my book The Jubak Picks and on my blog JubakPicks.com—that technology is an increasingly critical edge for industrial companies these days. When just about any industrial product is on the verge of being turned into a commodity, technology, the ability to make a product that does more, that does it for less, and that does it better, is the only thing that stands between success and a race-to-the-bottom competition to see who can move production to the lowest cost labor market.
I’ve written about Corning and Johnson Controls before. The former was in my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ until January 4, 2010. Johnson Controls is a member of that portfolio now. (See my most recent update on the stock in this post http://jubakpicks.com/2010/04/26/update-johnson-controls-jci-6/ )
So instead of re-plowing that ground let me use Cummins as an example. Read more
