Investors should not shy away from cyclical companies just because they aren't good long-term investments. I believe cyclical companies have much to offer, especially when they are coming out of a difficult situation.
I particularly like small-cap companies in the industrials sector. Chart Industries (NASDAQ: GTLS ) , Albany International (NYSE: AIN ) and Actuant (NYSE: ATU ) are three companies that might take off in the coming months. Here is a closer look at their operations.
The next big thing in the LNG world
Chart industries manufactures high-quality engineered equipment that is needed in the production, storage, and end-usage of hydrocarbon and industrial gasses.
Chart is the leader in high-end equipment that is used for the transfer of liquefied natural gas, or LNG. This is an interesting point about this company because the demand for natural gas as a transportation fuel is increasing worldwide.
There are many reasons why this change is well under way. Firstly, natural gas is a cheaper alternative to gasoline. Secondly, western countries, such as the United States, are working for greater energy independence to maintain their sovereignty. Chart's LNG transport equipment will definitely see a surge in orders, making market participants increasingly hopeful about the company's future.
The company is a one-stop solution for LNG-related equipment because it also manufactures heat exchangers, cold boxes, microbulk and satellite LNG storage tanks. These equipments are critical for the functionality of LNG networks. This small company has great potential.
Engineering marvels leading to growth
Albany is an advanced textile and materials processing company.
The machine clothing segment manufactures custom-designed belts and fabrics that are highly value-added and unique. Therefore, Albany usually has repeat orders from its customers; otherwise, they will have to face high switching costs. Albany claims that it is the world leader in the production of custom-designed fabrics and has little competition in target markets.
Albany's engineered composites segment manufactures highly advanced composite components that are sold to companies in the aerospace and defense industries. This segment accounts for only 10% of the company's revenues but it packs enormous growth potential. The segment is heavily involved in the development and production of the fan module component for the new leap engines. These engines are being designed for single-aisle airplanes.
Leap engines have the potential to revolutionize the aircraft industry. These engines are 15% more efficient than the regular engines. This is because Albany's fan module components have reduce the weight of these engines by a massive 1000 pounds. Major airlines, such as Southwest, Qantas, and AirAsia, have already started ordering these engines.
Setting a new direction for itself
Actuant provides highly specialized products and services that are needed in motion control systems and energy companies.
The company's electrical segment has been experiencing a constant decline in its sales. The trend, which started in the fourth quarter of 2012, has continued up till the most recent quarter. Due to the decline in revenues, the segment's operating margins have also decreased. Management has decided to divest its electrical segment and focus on the three remaining segments.
Actuant expects hefty proceeds against the sale of the segment which it will use to fund acquisitions and return capital to the shareholders. The management wants the company to grow in four areas of operations, including infrastructure, energy, sustainability, and natural resources.
In latest news, Actuant has acquired Scotland-based Viking SeaTech. Viking serves energy companies that have offshore assets. Actuant believes that it will derive great synergies from the acquisition because of the similarity of operations of the two companies. The company is responding well to the situation and I am positive about its future.
The industrial sector provides many exciting investment opportunities like the three companies mentioned above. In my opinion, all three of these companies have great potential going forward. I am particularly positive about Chart industries because the geopolitical factors are largely in its favor.
With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution." Just click here to learn more.