However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
Among the 14 stocks listed under conglomerates in the CAPS' screener, we've unearthed more than a few with high four- and five-star ratings. Those accolades mean our 140,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the five below:
|
Company |
CAPS Rating Today |
Recent Price |
52-Week Price Change |
Est. LT Growth Rate |
|---|---|---|---|---|
|
3M (NYSE:MMM) |
***** |
$77.80 |
27% |
11% |
|
Cherokee (NASDAQ:CHKE) |
**** |
$19.59 |
41% |
2% |
|
Crane (NYSE:CR) |
**** |
$29.51 |
147% |
11% |
|
Mitsui (NASDAQ:MITSY) |
**** |
$260.16 |
64% |
9% |
|
United Technologies (NYSE:UTX) |
**** |
$68.81 |
47% |
9% |
Source: Motley Fool CAPS; Yahoo! Finance.
As the broader market averages have staged a pretty bold recovery since their depths back in March, the average conglomerate stock as tracked by CAPS has had a pretty strong run-up, too, with values up more than 86% from the year-ago period. Crane obviously had a good stint as well, but was easily bested by GenCorp (NYSE:GY), which quadrupled in value since we identified it as ready to bounce back in July.
So let's take a closer look at why investors think that some of these other companies won't be jumping from the frying pan into the fire from the market's lofty heights.
Some spring in its step
Making elevators isn't what you'd call a sexy business, but the parent company of Otis Elevators, United Technologies, believes that despite a difficult outlook for commercial construction and aerospace, it's still going to be able to grow profit in 2010. Based on the predicted strength of its other businesses in the heating, ventilation, and air conditioning markets, as well as certain residential businesses, United Technologies remains confident it can boost earnings even in the face of flat revenue.
Highly rated CAPS All-Star Drew2142 is counting on the crazy-quilt collection of boring businesses to ultimately drive its stock price higher. In the meantime, the dividend that's currently yielding 2.2% will reward him for his patience.
It's true the hodgepodge conglomerate is diversified across many industries and includes Pratt & Whitney engines, Kidde fire protection services (and it just said it will buy General Electric's (NYSE:GE) fire detection and security services unit), Carrier air conditioners, and Sikorsky Aircraft. It has achieved its operational performance this year through relentless cost-cutting measures. Over the first nine months of 2009, it managed to cut costs of goods sold by 14% as revenue slid by a like amount. Such consolidation and restructuring can only go so far. With sales down sharply year over year, United Technologies' profit also took a hit, by 22% year to date.
Admittedly, the declining performance is going to give the company some easier comparisons next year when it starts to lap this year's performance, but the company will need to generate better organic sales growth if it's going to meet its goal. So, after a strong run-up in price this year, I'd say United Technologies shares might be due for a cooling-off period.
Out of gas?
It was a slightly different situation over at 3M, which benefited from the fears generated by swine flu. In its latest quarterly report, the maker of Scotch tape and Post-It notes reported that the division that makes respiratory masks has been running full-tilt since the worldwide health agencies began spreading fear that a killer pandemic was upon us.
While people were imaging a scene out of a Monty Python movie exhorting families to bring out their dead, 3M was quietly ramping up production of safety and protective gear to forestall the possibility of a modern-day bubonic plague scenario. Will the revelation that swine flu wasn't quite as virulent as we were led to believe cause 3M's stock to catch a cold? It might make people less likely to pay attention in the future to such dire warnings, but CAPS member Anjaconda figures its diverse portfolio will ultimately carry the day:
Great long-term investment. Succesful international company with wide-spread product portfolio in different markets.
With its diversity, investors remain inoculated against a light case of influenza causing 3M's stock to fall. Fully 97% of the nearly 4,000 CAPS members rating the conglomerate indicate it will outperform the market benchmarks. Join them on 3M's CAPS page to give your prognosis.
The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor-analysts on whether you think these stocks are ready to bound higher.
