Lindsay On A Hot Streak With Differentiated Underlying Drivers

As investors are increasingly worried about the broader economic outlook in 2023, markets with acyclical or counter-cyclical characteristics are more in favor. Agriculture and construction would be candidates to consider as part of that theme, and the shares of Deere (DE), Lindsay (NYSE:LNN), and Valmont (VMI) have been rather strong over the past year at a time when industrials as a group have lost about 15% of their value.

Higher rates are a risk, but farmer incomes and budgets are strong here of late, and irrigation equipment doesn't seem to have the same bottlenecks that other agriculture equipment has. Moreover, Lindsay offers good leverage to increasing activity on the road construction/repair side - a trend that should be countercyclical for a couple of years. At the same time, though, I do have concerns about Lindsay's weak historical FCF generation and lack of sustainable margin leverage. I do like the macro backdrop here, but I'd view this more as a trade than a core holding given valuation concerns.

 

Click the link to read the full article at Seeking Alpha: 

Lindsay On A Hot Streak With Differentiated Underlying Drivers