Bill Trent
Late last year, I used the government's PPI data by industry to scout out 26 investment ideas, among which were industrial valve manufacturers Flowserve (FLS Quote - Cramer on FLS - Stock Picks), Crane (CR Quote - Cramer on CR - Stock Picks) and Curtiss-Wright (CW Quote - Cramer on CW - Stock Picks). In October, I said Flowserve may be the best way to play the PPI report.
Since that column in October, Flowserve has gained more than 22.5%, while the S&P 500 has lost nearly 12%. Now the question is whether to let this winner ride or to take the money and run. For now, I think the answer is to keep on going with the Flowserve. For one thing, they call them "industrial" valves for a reason -- there is likely limited exposure to a consumer slowdown. According to the most recent 10K, the company's customer mix by end market is approximately 43% oil and gas, 23% general industrial, 15% chemical, 13% power generation and 6% water treatment. These are industries with long-term planning needs, many of which are finding themselves behind the curve. I don't see them slowing their spending anytime soon. This is supported by the pricing power the industry continues to enjoy. Although off the 2007 peak in the double digits, the year-over-year change in January was still far above the industry's long-term average and still indicating an overall rising trend.|
12-Month Percentage Change
in Industrial Valve Manufacturing Prices |
 |
| Click here for larger image. |
| Source: Bureau of Labor Statistics |
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