By and large nature teaches you to be wary of pretty things - they
don't taste good, they have fangs, and so on. That may be an odd segue
into a discussion of Cummins (NYSE:CMI),
but it captures how I feel about the shares. I think Cummins is a great
company, but as attractive as the shares seem, I do wonder how they
will fare as the North American truck cycle peaks and many emerging
markets continue to struggle.
I think investors forget that trucks
and truck components are cyclical markets at their own risk. But I also
think that the company can still generate long-term revenue and cash
flow growth in the mid-single digits, and that the shares are trading
below the value of those cash flows. I'm wary about buying into a
peaking North American market, but the underlying strength of the
components business, the opportunities in China, and the overall quality
of the business make this a tough stock to ignore.
Read more here:
Cummins Is Alluring... But Is It A Trap?
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