Federal Signal May Find Rising Expectations Hard To Meet

Like Miller (NYSE:MLR), a small industrial vehicle company I've written on in the past, Federal Signal (NYSE:FSS) toils mostly in obscurity with relatively little coverage (though significant institutional ownership). This company has undergone a lot of changes in the last five years, selling off pieces of the business and refocusing around its Safety and Security and Environmental Solutions operations, and management is now operating with what I would call ambitious but realistic operating targets.

The issue, as is the case for so many stocks now, is the price/value trade-off. These shares have rocketed up post-election (up almost 40% since November 1) and while the municipal and oil/gas markets may be improving, and may do even better under the new administration, I don't believe they've improved that much. Even with mid single-digit long-term revenue growth (ahead of likely municipal spending growth) and higher FCF margins, it is hard for me to see today's valuation as a bargain, though there is at least a credible possibility that Federal Signal could itself be an M&A target.

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Federal Signal May Find Rising Expectations Hard To Meet

Investopedia: Budget Worries Could Crimp Cubic In The Short Term

I think many investors spend too little time thinking about their investing horizons when contemplating new positions. Although "buy and hold until it works out" is probably the default strategy for many investors, it can lead to some tense moments in the short-term. That brings me to Cubic (NYSE:CUB), a company which I think has a very interesting long-term outlook, but may well underperform for the next year or two.

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http://www.investopedia.com/stock-analysis/2012/Budget-Worries-Could-Crimp-Cubic-In-The-Short-Term-CUB-FSS-LMT-LLL0924.aspx

Seeking Alpha: 3M Can Lead The Way From Here

3M (MMM) is one of my longest-held positions and one of the most confounding. I love the company's strong brands and excellent tradition of innovative R&D, but I have often found the company's M&A priorities to be both exasperating and confusing. And while the company has a remarkable record of steady performance, it seems to always be a relatively unloved name for Wall Street analysts. Nevertheless, with the company's sizable exposure to early-cycle markets and China in particular, I believe this company should be a leader if global growth resumes and a steady survivor if the malaise continues.

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3M Can Lead The Way From Here

Can Oshkosh Keep On Truckin'?

Financial instruments are supposed to discount future cash flows; that is, the price of a stock or bond today is supposed to be directly tied to the expected future cash flows tied to the security. If that were not the case, savvy investors would look to buy undervalued assets and sell overvalued assets until the prices were in balance. 

Okay, that is Finance 101, but it is a relevant reminder when approaching heavy-duty vehicle maker Oshkosh (NYSE:OSK). Right now this company is booking excellent profits on its defense business, but the valuation multiples are quite puny. Clearly, the investment community is expecting much less from Oshkosh in the future and the real key here is whether business will fall off as much as people currently expect.

The Quarter that Was 
We will get to the future in a moment, but let us look at the June quarter (the company's fiscal third quarter) first. Revenue spiked upwards this quarter, more than doubling to $2,439 million. This growth was fueled by a near-tripling of revenue from the defense business, while the access business improved and the fire/emergency segment was down by double-digits.

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http://stocks.investopedia.com/stock-analysis/2010/Can-Oshkosh-Keep-On-Truckin-OSK-NAV-FSS-TEX-HTZ0804.aspx