Every week, just as a matter of routine and discipline, I run a scan of stocks that fit a strict set of fundamental and technical criteria. Most of the results are worthless (though I know that going in), but there's always a gem buried in there somewhere. This week's gem is Valmont Industries, Inc. (NYSE:VMI) - a metal fabricator. No, it's not the sexiest of businesses, but VMI certainly is the sexiest (relative to its risk) of stocks for those concerned about a company's consistency.
The Valmont Industries catalog is about as boring as you might think it could be... tubular products, steel and aluminum towers, irrigation systems, and concrete pads, just to name a few. While the company may not be whipping investors into a frenzy with its cutting edge products, investors may want to bear in mind that the lower-brow the product is, the more consistent VMI can be when it comes to selling them.
And sure enough, VMI has proven itself when it comes to that consistency.
As the chart below illustrates, quarterly and trailing-twelve-month earnings have risen steadily since 2005, chopping around just a bit in 2010, and hitting something of a lull the past couple of quarters. Those are apt to be short-term stumbling blocks for Valmont Industries, however. Analysts project that the company is going to ramp up earnings by 9% in 2015, although 2014's per-share income is expected to slide by 5%. Don't worry though. VMI has a long history of significant earnings beats. After getting past 2010's turbulence, the company has topped estimates in ten of the past twelve quarters, missed once, and met once. Granted, the miss was Q3 of last year and the met was Q4 of 2013, but all signs point to the company getting back on track beginning in Q1. Better still, the forward-looking (2015) of 13.5 is tiptoeing into "value" territory.
With all of that being said, the fundamentals aren't the reason I'm stepping into Valmont Industries, Inc. in my public portfolio today. The core of my reason for jumping in here is technically based - a broad uptrend for the stock has been renewed, and more recently has been confirmed. VMI shares are back above the 100-day (gray) and 200-day (green) moving average lines, and both of those lines are pointed upward. The stock's already logged a string of higher highs and higher lows. What I'm hoping for here is a repeat of the kind of move we saw in 2012 coming out of a similar chop - and lull - in the latter part of 2011.
Feel free to poach the idea if you want, though bear in mind that Valmont is far better suited for long-term investors than it is for traders. Or, better still, you can follow me and my portfolio at the SCN site to keep up with all my picks and my eventual exit of VMI.
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