The manufacturing sector is not exactly what I would call a booming place to be right now. Although the Purchasing Managers Index has shown growth in 31 straight months, not everything is nearly as peachy as it could be.
Aluminum producer Alcoa
Now more than ever, investors are having to look internationally for growth in the manufacturing sector -- and I think I've got just the recipe for success.
The U.S. residential manufacturing picture may be bleak, but the automotive industry seems to be prospering just fine. In February, General Motors
One of the only automotive segments not doing as well is heavy-duty trucks, which usually respond poorly to rising gasoline prices. Luckily, Grupo Simec does not supply parts to this segment.
Grupo Simec's 2011 full-year results, released on Valentine's Day, confirm just how far the company has come since I first recommended adding it to your watchlist 15 months ago. Total sales rose 19%, operating income jumped 123%, and the company kept its costs under control with operating expenses falling 46%. Most importantly, it proved that it can grow its businesses domestically. Mexico's GDP growth has fluctuated between 0.4% and 2% for the past two years, yet Grupo Simec, which derives 47% of its business from Mexico, was able to grow sales by 26% in the country the past year.
This company could represent one screaming steal of a deal in the steel sector, given that it's trading at just 11 times forward earnings and is currently priced slightly below its book value. It does lack a dividend, which would be a nice addition, considering that Grupo Simec has been profitable in all but one year over the past decade. But we can't always get what we want, can we?
Since making a CAPScall of outperform on Grupo Simec, I am up 14% and I expect that momentum to continue. Do yourself a favor and add Grupo Simec to your free and personalized watchlist and consider making your call as to what the future holds for this specialized steel company.
Just as I'm attempting to find diamonds in the rough, so is our top-notch team of analysts. In our latest special report, "The Motley Fool's Top Stock for 2012," our chief investment officer names a company he's dubbed the "Costco of Latin America." Find out the name of this company for free for a limited!