Chart Industries Stock Is on a Tear: Can It Keep Running Higher?

On the Dec. 16 edition of "The Wrap" on Motley Fool Live, a listener asked about Chart Industries (GTLS -0.68%), the company in the middle of some of the biggest trends in investing right now: cannabis, the coronavirus pandemic, and the growth of global energy demand. Shares gained almost 75% in 2020, and since Dec. 16, have continued to roar higher, gaining another 23%. 

In the video below "The Wrap" host Jason Hall explains more about Chart's prospects -- including how investors might be overestimating some of its potential in certain areas, pushing the shares up to a very rich valuation. His take: Chart is an incredible business with wonderful leadership and strong prospects. The price might be very high today, but investors might want to consider opening a small position, and should certainly keep following the company closely. 

Transcript: 

Danny Vena: Chart Industries has been on a tear for the last few months, and I haven't heard anyone at the Motley Fool talking about it. The last thing I saw was your article back in July. Why has it grown so much? Do you think it will continue to grow?

Jason Hall: Yeah. So there's a couple of things going on with Chart Industries. The first thing I want to say is, if you want to vote for CEO of The Year, vote for their CEO. She has done an incredible job and it's a job that started a number of years ago. This is a company that went through an enormous amount of turmoil and their executive suite, especially, I mean, they went through three CEOs and about two years. She's done just an incredible job and the Board gets a lot of credit because they were really a steadying hand through all of that change.

But she's done a wonderful job of helping the company focus on really getting its core business, which is cryogenic gas processing equipment, manufacturing and servicing, really focusing on the best parts of that business. Selling off assets that really didn't fit with the mix and looking to leverage new markets with that technology. 

The ticker for Chart Industries by the way, is GTLS. It's very different than the name of the company.

Here's what's happened with Chart Industries. There's a couple of things. The big opportunity for Chart, like the huge opportunity is natural gas exporting and importing. You'll have to liquify it, but falls right into their wheelhouse in terms of the equipment that they make to take natural gas and convert it into a super cold liquid. Then on the flip side, I guess loaded on container ships. Then on the other side, it gets regasified and put into pipelines wherever that market is that it's being delivered to. They're on both ends of that. They're also on the vehicle side making fuel storage for liquefied natural gas, vehicle fuel tanks. It's a really big opportunity.

But there are also really big and cryobiological healthcare applications. It's kind of of gotten pulled into this coronavirus vaccine stocks. They've also gotten pulled into cannabis stocks because their equipment can be used to process CBD oil out of cannabis. So there's all these little hypergrowth tailwinds that are pushing the stock up.

I think the big one that's pushed it up lately is the idea that it's going to be some massive winner, providing storage equipment for keeping the vaccines super-cooled. That's one of the big logistical challenges. They do make equipment to do that, but this isn't a multi-billion dollar market opportunity for them. I think that's played a big role in driving the stock price up.

I continue to love the business. It's very, very richly valued. If you bought it today, is it going to be at the market over the next year? I don't know. Some wind could go out of the sales and could fall 30% this spring when the vaccines have been rolled out and they've announced a couple of quarters, and it hasn't been a big impact on their bottom line. I don't know if that's going to happen.

I think, to me, I own a lot of Chart and I'm not looking to buy right now. If somebody was really interested in Chart and didn't own any, I think this is like a great skin in the game stock, you buy a small position, follow the business, get to know it, again, it is it a rich valuation. Then if the market at some point changes its tune and the stock does fall, unless there's structural problems at the business or something is not working or if something fundamentally changes in the thesis for the business going forward, then it's probably a stock that you buy on the dip opportunity.

I'm not selling for sure at this price because I think it's going to be at the market over the next decade and my goals are a decade, two decades, down the road. I love the business. It's very pricey. It's worth at least continuing to follow if not taking a small starter position.