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By Bill Trent
RealMoney.com Contributor
9/26/2007 2:00 PM EDT
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My article last week about
mining the PPI report for stock ideas was so well received that I thought I'd share another of my favorite taxpayer-provided idea generators, the durable goods report.
Published by the U.S. Census Bureau, the report has a similar breakdown by industry of durable goods orders, shipments, inventories and backlog. After the report, I came away with 28 potential ideas for further research.
In line with much of the recent economic data, the headline durable goods number was weaker than expected. To quote from the report:
New orders for manufactured durable goods in August decreased $11.3 billion or 4.9 percent to $219.5 billion, the U.S. Census Bureau announced today. ... Shipments of manufactured durable goods in August, down two of the last three months, decreased $3.4 billion or 1.6 percent to $216.7 billion.
But in this case, I think focusing on the forest means you could miss out on some of the more attractive trees.
I gathered the data from the Census Bureau and created charts showing the year-over-year change in durable goods statistics for a variety of industries, hoping to find some areas worth further consideration. Keep in mind that this is an initial screen for idea generation, not a full-fledged analysis of any of the names. You wouldn't want to buy the stocks listed here without further research. That caveat aside, let's look at some of the better-performing industries.
First up is technology: computers and electronic products. Although 3.3% order growth year over year and essentially flat shipments may not be the type of growth investors typically look for from tech, it is a clear improvement from recent months. Inventories are starting to be drawn down, and backlog remains strong.
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| Source: U.S. Census Bureau, Bill Trent |
But there are areas of strength and weakness within tech. Specifically, computers (and related products) are starting to look strong, with backlog headed through the roof and inventories in check.
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| Source: U.S. Census Bureau, Bill Trent |
The fairly obvious stock ideas from this industry include
Apple
(AAPL)
,
IBM
(IBM)
and
Hewlett-Packard
(HPQ)
. If things keep getting better (and the company figures out how to file its required regulatory reports),
Dell
(DELL)
might even look interesting again.
Stretching a bit further,
Sun Microsystems
(JAVA)
and
Lexmark
(LXK)
come to mind. And don't forget the storage plays, which also showed up on the PPI hotlist. The names I mentioned then were
Brocade
(BRCD)
,
EMC
(EMC)
,
Iomega
(IOM)
,
Hutchinson
(HTCH)
,
Quantum
(QTM)
,
SanDisk
(SNDK)
,
Seagate
(STX)
and
Western Digital
(WDC)
.
Communications equipment is also showing some signs of strength. Though the latest month was down, the trend seems to be up.
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| Source: U.S. Census Bureau, Bill Trent |
I have actually
analyzed Motorola
(MOT)
, so that would be a play to include here.
Cisco
(CSCO)
,
Research in Motion
(RIMM)
,
3Com
(COMS)
,
Nokia
(NOK)
and
Corning
(GLW)
also come to mind.
And finally, turning away from technology, I hope you didn't think the aircraft boom was over. If anything, it looks to be picking up steam.
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| Source: U.S. Census Bureau, Bill Trent |
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| Source: U.S. Census Bureau, Bill Trent |
Ways to play this include
Boeing
(BA)
,
Embraer
(ERJ)
,
General Dynamics
(GD)
,
United Industrial
(UIC)
and Cessna parent,
Textron
(TXT)
. Parts suppliers include
Rockwell Collins
(COL)
,
Curtiss Wright
(CW)
and
LMI Aerospace
(LMIA)
.
So there you have it: 28 potential stock ideas from what looked at first glance to be a negative report on durable goods.
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