The Ugly Market Selloff Brings Lincoln Electric Back Into A Long-Term Buy Range

It takes a lot to knock well-respected, high-quality stocks down to attractive valuations, and this ugly market selloff is doing just that for many stocks, including Lincoln Electric (LECO). Make no mistake, current conditions are pretty challenging for this leading welding company, and whatever recovery may come in 2020 is not likely to be particularly strong. Still, this is a company that has been through this before (many times, actually), has a business plan that gives it a lot of cost flexibility, and is going to emerge from this correction in solid condition.

The biggest issues I see with recommending Lincoln here and now are the questions of how the recovery will look and how much further downside there could be from here. I’ve been generally more bearish than most Street analysts on the outlook for the 2020 short-cycle recovery, and Lincoln management’s commentary does seem to support the idea of a shallower recovery (at least in 2020). With that, there could still be some risk to estimates (particularly if Covid-19 pushes the U.S. into recession). Likewise, markets tend to go too far to the good and bad, so I cannot rule out the risk that Lincoln shares will get even cheaper before finding a floor.

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The Ugly Market Selloff Brings Lincoln Electric Back Into A Long-Term Buy Range