Tuesday, August 9, 2016

Lincoln Electric Nearing The Bottom, But The Market Has Responded

The market often anticipates significant changes in direction, and so it's not surprising to see that Lincoln Electric (NASDAQ:LECO) shares have been strong in anticipation that the fourth quarter of this year will see a return to reported revenue growth. The shares are up about a third from when I last wrote (amid the deep gloom in the markets at the start of the year), and there have been some encouraging notes - Halliburton (NYSE:HAL) thinks the worst is over in the North American energy market, non-residential construction continues to grow, and although metalworking tool demand hasn't improved, it does at least seem consistent now.

Lincoln Electric is one of my favorite companies, but the shares don't often get all that cheap - that big pullback in late 2015/early 2016 was one of those rare opportunities to get in at a better valuation. I still believe that Lincoln Electric is a mid-to-high single-digit grower long term and has little to fear from Colfax (NYSE:CFX), Illinois Tool Works (NYSE:ITW), or other welding companies. If you can be happy with a high single-digit gain, with a little dividend yield on the side and perhaps some upside from automation and advanced welding tech, there's still a reason to keep this name in mind.

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Lincoln Electric Nearing The Bottom, But The Market Has Responded

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