Two Manufacturing Stocks for the Long Run
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Manufacturing stocks have had a rough three months as concerns over a slowdown in worldwide growth have reduced earnings estimates for the sector and hit these stocks hard.
- It has an A-rated balance sheet and pays a dividend of 2.3%. It has raised its dividend payout at a 10% annual clip over the past half-decade.
- The company has done a good job of moving into higher-margin, less-capital-intensive businesses over the past few years. To this end, the company has made scores of small acquisitions over the last decade. Analysts expect between 6% to 9% revenue growth a year in fiscal 2012 and 2013.
- Dover has beat earnings estimates for 12 straight quarters. The stock also sports a forward price-to-earnings ratio of just over 10, a discount to its five-year average of 13.7.
- The stock was upgraded to Outperform in mid-July at William Blair, it has a median price target of $67 a share from the analysts who cover the stock, and Standard & Poor's has a Buy rating and a $72 price target on Dover.
- After its recent selloff, insiders have increased their purchases. Two insiders bought almost $300,000 in new shares in late July.
- The company is cheap at just over 7x forward earnings, a steep discount to its five-year average of 17.9.
- The nine analysts who cover the stock have a median price target of $49 a share on Timken. The stock is selling at 6x operating cash flow, and it also yields 2.4%.
- I recently doubled my position in the stock, as it is approaching some long-term technical support.
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