Given where we are in the cycle and the robust valuation
of many factory automation stocks, and particularly those in Japan,
finding one that doesn’t seem all that expensive leads to a certain
level of “what am I missing?” paranoia. In the case of THK (OTCPK:THKLY)
it’s not too hard to see why the shares are trading at a seemingly
reasonable valuation – a surge in orders from machine tool,
semiconductor equipment, and other industrial companies has driven
financials, but analysts are now worried that the company is looking at
impending bad news as electronics, machine tool, and general industrial
orders could all slow in the next 12 months or so.
In
my experience I’ve done much better trying to buy stocks like THK
around the bottom rather than at the cusp of a downturn. Although that
downturn may not come – electronics orders could rebound and machine
tool orders may not slow as expected – the DCF valuation isn’t in “can’t
miss” territory and I’m concerned that this recent upsurge has breathed
a little extra life into THK’s rivals.
Read more here:
The Market Believes Winter Is Coming For THK
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