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Ask a Fool: Do You Think PACCAR Has Room for More Growth?

Image courtesy of PACCAR

PACCAR (NASDAQ: PCAR  ) is one of the leading manufacturers of light-, medium-, and heavy-duty trucks, popularly known by the brand names they are sold under -- Kenworth, Peterbilt, and DAF. The heavy-duty is the most important truck segment, and PACCAR has a solid footing in the market. It was the world's fourth-largest producer of trucks over 16 tons in 2012, just behind Daimler, Volvo, and Volkswagen. Its closest rival, Navistar International (NYSE: NAV  ) , is ranked 11th, with production less than half of PACCAR's. That's certainly worth noting.

Solid footing
In fact, PACCAR's business and goodwill received a big boost since customers lost confidence in Navistar International after its warranty claims surged and its ambitious engine technology failed last year. Currently, PACCAR enjoys nearly 29%, 34%, and 47% of the heavy-duty market share in the U.S., Canada, and Mexico, respectively. That's excellent footing, which is getting stronger by the day.

But I think what really sets PACCAR apart is, its leading position in the natural-gas-fueled truck market.

Solid leadership
PACCAR dominates the U.S. market for natural-gas, heavy-duty trucks with 40% share. I think that's a huge competitive advantage, and the key to PACCAR's growth, given how natural gas is assuming importance as an alternative fuel. PACCAR has been a pioneer in building trucks than can run on natural gas, and it sources most of its engines from the leading engine maker, Cummins (NYSE: CMI  ) . Cummins' solid brand image adds greater value to PACCAR's trucks. What's more, PACCAR is even building a "Super Truck" with Cummins, which showed an astounding 54% improved fuel economy during its test runs. That sounds fantastic, and I'm sure every driver will keep an eye on that machine.

Solid opportunity
You might argue that the adoption of natural gas as a transportation fuel is still in its nascent stage, so why should you invest now? Well, the biggest reason is that there has been a remarkable surge in the interest in natural-gas vehicles this year alone. Huge truck fleet operators like United Parcel Service, FedEx, and Lowe's, just to name a few, have made huge announcements marking their rapid shift toward natural gas. So this fuel could actually sweep American roads sooner than you think, and that's a huge opportunity for PACCAR.

Solid global presence
And it's not just the U.S. market where PACCAR is finding growth. More than half of the company's sales come from outside the U.S. PACCAR has already ventured into Brazil this year with a new plant, and is eying the Indian market next. Europe accounts for nearly a quarter of its revenue, but that's not a problem, because PACCAR's DAF trucks lead Europe's top truck market, the U.K., with 30% share.

Solid growth story
I think, overall, that PACCAR is a compelling growth story, especially if you want to profit from the natural-gas-transport revolution. The company's revenue and net income have more than doubled over the past decade, and I don't see a reason why it should stop here. I strongly suggest that you pay close attention to this stock.

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