2 Stocks to Buy Now

Warren Buffet's advice to "[be] fearful when others are greedy, and greedy when others are fearful" is fitting for where the stock market sits currently. Some investors have become cautious since the market approached record highs, but there are always values to find and portfolio gains to be had. Two of the most important factors when evaluating investments is to find companies with sustainable profits and positive catalysts that could boost their stock prices. I believe General Motors (NYSE: GM  ) and Cummins (NYSE: CMI  ) both are a perfect match when considering those factors.

Lean and diverse
GM has restructured its operations enough that analysts estimate it could break even as long as the U.S. market sells over 10 million vehicles. That's a drastic improvement considering that prior estimates pointed to a break-even point of 16 million vehicle sales. GM's leaner operations will provide sustainable profits.

In addition to its leaner operations, it's also not dependent just on sales here in the U.S. GM also enjoys a dominate position in the world's largest and fastest-growing automotive market – China. China's vehicle sales are expected to grow by nearly 12 million vehicles by 2020. That's the equivalent to Europe's entire market today and will certainly help GM grow its top-line revenues.

Cummins is a global equipment powerhouse that sells a full range of products in over 70 countries, but is best known for its leading technology and high-quality engines. Its top of the line engines bring in 53% of company sales, yet the company relies on diversity to ensure its profits are sustainable. It brings in the rest of company sales from three other business segments, lessening its dependence on engines for its growth. Moreover, its U.S. and international sales are about evenly split. This leaves Cummins and its investors with very sustainable profits that will only improve as the global economy picks up.

Future catalyst
For GM I think there are two short-term catalysts that could boost profits and demand for its stock. The first catalyst will happen when GM breaks even in Europe, a factor that could remove up to $2 billion in losses per year and directly boost bottom-line profits. Management expects to break even in the region by mid-decade, and reported first-quarter losses that were less than expected – a good sign early in the year.

The second catalyst won't directly affect profits, but it will likely provide additional demand for GM stock. The U.S. treasury plans to close the book on its ugly chapter of auto industry bailouts; when it unloads the rest of its shares in GM, it might provide the signal to buy that potential investors have been waiting for. Only time will tell how much those two factors will boost the stock price, but one thing is for sure, both will be very positive events.

I believe Cummins has a very intriguing catalyst, although unlike GM's short-term catalysts, it's for a long-term investor. Cummins is uniquely positioned with its brand name and industry-leading engines to take advantage of the natural gas boom. Millions of 18-wheelers across the trucking industry are going to be enticed to switch and run on natural gas engines. It sounds radical, but it's actually really logical. Liquefied natural gas, or LNG, has been proven to be a cheaper, cleaner fuel – and it's abundant right here in the U.S. As traditional fuel costs and emission standards rise, the switch could happen sooner rather than later.

Cummins is developing its own natural gas engines, and in April it began shipping a large LNG engine that can make long-haul trucking a real possibility. Cummins also has a joint venture with Westport Innovations (NASDAQ: WPRT  ) which specializes in building natural gas engines. There's room for both in the market, and together they will set the bar very high for competitors looking to get a piece of the growing pie. If truck fleets begin to switch to LNG engines it will pay off handsomely for Cummins and its investors.

Bottom line
There's a lot to like about both of these companies in terms of value and sustainable profits. Both have future catalysts that could significantly boost stock prices and handsomely reward long-term investors. If you're looking for investments that have been left behind in the stock market's rally, look no further, these could be two stocks to buy now.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 29, 2013, at 11:59 AM, AmericanFirst wrote:

    If you don't believe in capitalism and are OK with the taxpayers taking a $10-15B hit, plus not paying income taxes to gov. that bailed them out and enormously advantaging GM over their #1 rival Ford. Yes, by all means invest in GM!

  • Report this Comment On May 29, 2013, at 12:27 PM, TMFTwoCoins wrote:

    I'm not OK with it. You can see my thoughts and conclusion here.

    http://www.fool.com/investing/general/2013/05/19/how-much-gm...

  • Report this Comment On May 30, 2013, at 3:24 PM, Robear1020 wrote:

    Regarding: Warren Buffet's advice to be fearful when others are greedy, and greedy when others are fearful" is fitting for where the stock market sits currently... Is the market really being fearful when a stock is this close to its ten year high? I'm sure that Cummins is a great investment with its market cap of over 22B but I'd prefer to look at Wesport with a much smaller market cap and still 50% below relatively recent highs (see Feb - Mar of last year)

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