This stock market continues to chug along, like the little engine that could. This has been the most resilient market since the 1990’s, showing just how much money is trying to work its way into stocks. This is forcing people to buy on the shallowest of dips. The market action this week tells me there’s a good chance we don’t see the pullback I was expecting and we’re more likely to continue sideways until we can pick up momentum with an eventual rally into year-end.
I initiated positions in a handful of new stocks that I’ve had my eye on for a while. I was hoping to pick them up at lower prices, but sometimes you have to take what the market gives you. Plus, if a surprise event actually throws the market lower I’d be more than happy to average down by buying more. I’ll also be looking to cut back on some of our biggest winners later this year as it’s only a matter of time before the big money starts to do the same to lock in profits and rotate into underperforming sectors. Always want to stay ahead of the curve.
Here are some of the new stocks I bought this week:
Valmont Industries (VMI) – A producer of engineered infrastructure products and coatings. They have their hands in a number of different industries, making products for lighting, wireless communications, support structures, steel & concrete structures and irrigation. I’m using the weakness over the past few months as a chance to pick up an initial position.
VMI – 2 year (weekly)
Neogen (NEOG) – They offer a wide range of products for food and animal safety – primarily diagnostic test kits to detect foodborne pathogens, allergens, toxins, etc. for human food and animal feed. This company fits the bill for opportunities in the growing food/agricultural business as a growing global population demands better quality foods. The bulk of growth is being generated through acquisitions as they find smaller companies with specialty products, but they’re also focusing on growing sales in Brazil (a major food producer) and China (a major food consumer). I really like the long-term prospects and would welcome any dips in the stock to buy.
NEOG – 2 year (weekly)
Generac (GNRC) – Maker of generators and engine powered products.
GNRC – 2 year (weekly)
Louisiana Pacific (LPX) – A maker of Oriented Strand Board (the boards of wood with all those little wood chips that are sealed together), providing exposure to the improving housing market. They also make various types of beams, joists and lumber products which are supposed to be stronger and last longer than traditional lumber. I was watching this one for a while and decided to pull the trigger after the stock got knocked down over the past few months and they announced on Sept. 5th that they’re purchasing Ainsworth Lumber, a Vancouver based company.
LPX – 2 year (weekly)
AeroVironment (AVAV) – A maker of unmanned aircraft systems (UAS’s) and electric vehicle (EV) solutions. Their UAS’s are all small, handheld drones used by the military and are considered best-in-class. These allow troops to scope out areas before advancing. They also just received the largest order in company history for more of their Switchblade drones, which are tube-fired “suicide” drones with a 40mm warhead that allows for precise, short-range attacks. It’s controlled by GPS, giving soldiers the ability to change or call off the attack after launch and limit non-combat casualties. The army has called this “an invaluable tool.” This is definitely the direction our armed forces are moving to reduce the number of troops on the ground as well as casualties. Their drones are also used by some private sectors like the energy industry to keep an eye on pipelines, but the military is certainly their primary customer.
Their EV systems are the charging stations for electric and hybrid cars. They’ve linked with Nissan, BMW, Mitsubishi, Ford and now Fiat to sell with their electric/hybrid cars for home recharging as well as public stations.
This is an interesting one… but I really like this company’s long-term prospects and strength of their balance sheet. My biggest concerns are how competitive these markets are and the government spending cutbacks. The stock was cut in half from its high of 36 in 2011, down to 18 earlier this year, after defense budget cutbacks cost them $100 million worth of orders last year. However, I think their products have proven to be best in class and the market for drones is expected to double over the next few years. It’s easier, safer and cheaper to send out a few drones rather than a couple hundred soldiers on foot. Not to mention, at a $500 million dollar market cap, they’re an easy takeover target for any of the big defense contractors.
AVAV – 2 year (weekly)
Have a great weekend!
-Nick