Manitowoc (MTW): Turnaround stock
By Elyse Andrews
From Cabot Wealth Advisory 5/7/11 Sign up for free Cabot Wealth Advisory e-newsletterOne construction company that's benefiting from the rebounding economy is Manitowoc (MTW), which was recommended in Cabot Top Ten Trader earlier this year. Mike Cintolo had this to say about it in late March:
"While three out of every four big winners in market history are growth stocks, one in four is a turnaround stock, usually a dominant player in a stagnant field that suddenly comes to life because of something new, such as new management, a new product, or, in Manitowoc's case, new industry conditions. Specifically, demand for the firm's cranes--used in huge, usually commercial construction--went kaput from late-2008 through last year, but now demand is picking up; in the fourth quarter, earnings came in well ahead of estimates and sales were higher than a year ago for the first time in eight quarters. More important, though, is that the company's crane backlog jumped 28% from the prior quarter (and total orders were up 70% from a year ago), convincing investors that the long-awaited upturn in Manitowoc's business had arrived. Historically, when the turn comes, business remains robust for many quarters, if not longer; analysts see the bottom line leaping to 65 cents a share this year and $1.42 next, which could be conservative. The company also does good business in food service equipment, but the upturn in cranes is why the stock is so powerful.
"MTW rallied from a bear market low of 2 to a peak of 16 in the spring of 2010. Then the stock built a huge base into January of this year, before a great fourth quarter report blasted the stock out of that base on enormous volume. It rallied above 21, and after dipping below 18 during this correction, found strong support at its 10-week moving average and is perched just a few percent below its recent high. We think you can buy a little in this range, use the 50-day line (around 17.5) as a stop and look to average up when the market re-enters an uptrend."
You could buy MTW here and hope for the best (an especially dicey option when you consider the market's performance this week), or you could get Mike's latest advice on this and other top stocks in Cabot Top Ten Trader.
Editor of Cabot Wealth Advisory
Elyse Andrews edits Cabot Wealth Advisory, a free email newsletter that offers independent, no-nonsense investment advice on how to build long-lasting wealth written by Cabot's analysts and editors. Every Saturday, Elyse writes the Weekend Digest, which includes her column and a summary of Cabot Wealth Advisories that readers may have missed during the week. Elyse is also a regular contributor to The Iconoclast Investor, a blog for Cabot editors and readers to share their views and interact with each other.
By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly
From Cabot Wealth Advisory 3/3/11 Sign up for free Cabot Wealth Advisory e-newsletter
Manitowoc (MTW) is in the exciting business of … cranes. Seriously! The big idea here isn’t that the company has something terribly new and exciting, but that, as one of the largest crane operators in the world, Manitowoc is highly, highly leveraged to the business cycle—when business is good, it’s very good.
Unfortunately, the company’s business was in tatters for much of the past couple of years, but that changed in the fourth quarter. Earnings, while still at low levels, beat estimates by a wide margin, and more importantly, Manitowoc’s backlog for its crane business soared 28% from the previous quarter. Combine that with optimistic words from the firm’s top brass on the conference call, and institutional investors took it as a sign the upturn had begun.
And so these big fish bought shares … a lot of them! MTW soared nearly 40% five weeks ago on volume that was more than triple average. Better yet, this move took the stock out of a nine-month basing formation—really, the stock’s first major launching pad of the bull market. Said another way, MTW is not “overowned” by the institutional crowd or overly obvious to the retail crowd; if anything, we think many big fish will be trying to build positions over time, as it’s a relatively sure bet that this company’s earnings have bottomed and will head significantly higher in the quarters to come.
During the market’s recent bout of indigestion, MTW fell from nearly 22 to 18.5, but has held up well since, still meandering just south of 20. Shares might need a few more days or weeks to consolidate, but I think buying in this area, or on weakness into the 18 range, will work out over time. MTW is likely still in the early stages of a big-picture advance that should play out over months.
Editor’s Note: Mike Cintolo is VP of Investments for Cabot, as well as editor of Cabot Market Letter, a Model Portfolio-based newsletter of the best leading growth stocks in the market. It’s been 50 months (just over four years) since Mike took over the Market Letter, and if you invested $10,000 when he started, you’d be sitting on north of $16,000 today … compared to just $9,200 if you’d invested in the S&P 500! He’s beaten the market by 14% annually thanks to top-notch stock picking and market timing. If you want to own the top leaders in every market cycle, be sure to give Cabot Market Letter a try by clicking HERE.
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.
2400 South 44th Street
Manitowoc, Wisconsin 54221-0066
|Index Membership: N/A
Sector: Industrial Goods
Industry: Farm & Construction Machinery
Full Time Employees: 13,300