I think that there are plenty of opportunities in this sector. The one I am going to focus in on is Cummins (CMI), a manufacturer of engines and power generation systems. This company is in an industrial/transportation subsector that remains in demand around the globe, especially in the U.S. and emerging economies.
In 2011, the stock price of Cummins declined 20% despite a surge in expected earnings per share of 68%. This resulted in a tremendous contraction of the price-to-earnings multiple, from 21 to about 11. This ratio has been quite volatile for the company's stock, hitting a low of 7 for fiscal 2008 before rising to 21 for fiscal 2010.I expect that Cummins will earn $10 per share in 2012 and will see its stock price rise to at least $110 and perhaps more if we get the expected expansion in S&P 500 price earnings multiple that I expect in 2012. Cummins shows up on a recent list of 21 Stock Picks That Experts Agree On.
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