Random low P/E stocks.

[CCdaCE]

What's going on here?

Am I becoming better at stumbling on to "good stocks" or is something going on with earnings -- still claiming high earnings after the housing "boom"?

Seems like the last few stocks I'd think about buying have rediculously low Price/Earnings multiples.

Obviously, I don't have a clue about what I'm doing, and there are more measures to look at beside P/E, etc. Mostly, all of this is just entertainment.

NUE - Nucor Corp.

WOR - Worthington Industries, Inc.

... both steel related.

USG - USG Corporation

... gypsum

CAT - Caterpillar Corp

URI - United Rentals, Inc.

IR - Ingersoll-Rand Company Limited

.. equipt./machinery

Etc.

Mostly all similar P/E (no raging deals) compared to their sector. Just all seem to have low P/E's.

In addition, forward P/E is generally lower (tendency to over-estimate earnings?).

Any comments?

-CC

 

[brewer12345]

These are cyclicals, so earnings will be pretty volatile through the economic /industry cycle. There are two ways to make money with these kinds of stocks:

1) make a correct call on where we are in teh cycle

2) Buy when the market has bashed the stocks down far enough that they are cheap even if the cycle slides somewhat.

 

[clifp]

Personally, I think P/E need to be in the 7 or 8 range to be considered ridiculously low. That said most of the companies do have relatively low P/E primarily because they are cyclical stocks and the conventional wisdom is we are near the top of the business cycle. For example in the old days when GM and Ford were actually making money they would have a P/E near 5 or 6 at the end of economic expansion.

FWIW, it is worth Warren Buffet has been acquiring shares of USG for sometime; now following Buffett isn't a sure-fire path to riches, but it is comforting to know that your aren't being stupid.

I've owned CAT for 8 years, and it has almost tripled in value plus a respectable dividend. The company does seem to have its act together as far putting out a quality product, and delivering reasonably dependable earnings, but a worldwide economic recession will hurt it badly as construction projects get canceled.

 

[CCdaCE]

<snip>

FWIW, it is worth Warren Buffet has been acquiring shares of USG for sometime; now following Buffett isn't a sure-fire path to riches, but it is comforting to know that your aren't being stupid.

I've owned CAT for 8 years, and it has almost tripled in value plus a respectable dividend. The company does seem to have its act together as far putting out a quality product, and delivering reasonably dependable earnings, but a worldwide economic recession will hurt it badly as construction projects get canceled.

Well, maybe Warren is playing both sides since USG got smacked with asbestos suits and Warren had a part in bailing them out, insurance-wise. Once he/they got a handle on how much this would cost 'em... and once that is over, he'll profit handsomely.


Seems like CAT got smacked when raw materials prices went up, too. Ahh, risk.

-CC

 

[terminator]

I've looked at four of the ones you mentioned (USG, IR, CAT & NUE). They look okay, but to me they don't look bargain cheap either. Be sure to look at their debt since that will be important when their cyclical earnings decline. I think I remember USG having a lot of debt.

Others I've looked at as being "PE cheap" candidates but which I have not bought are Illinois Tool Works (ITW), Graco (GGG), Dover (DOV), Eaton (ETN), Lincoln Electric (LECO). I like ITW and GGG best as historically they seem less cyclical than the others. But I didn't like either enough to buy them. Just one more opinion . . .

 

[wildcat]

Better to use normalized earnings for the cyclicals - somewhat close to an avg between the boom/bust cycle.

USG may be aquired by Buffet at some point. One of my greatest follies thus far was selling a lot USG shares early - around $8 - at a cost of $4 during bankruptcy. I was worried my equity was going to be worth squat.

I'd take a pass on the others.

 

[Animorph]

If everyone wanted them, they wouldn't have low P/E's.

Also look at the historical industry P/E's. Some just run low all the time.

You checked the forward P/E, but that's still a guess. It could be a case of great past 12 months and lousy investor expectations for the coming 12 months.

Dan

 

[milmoose]

Some more ideas for you (all P/E's trailing):

Aspen Insurance (AHL): P/C insurance and reinsurance with heavy marine exposure. 6.8X P/E, 1.15X P/B.

Devon (DVN): Large independent oil/gas producer. 9.5X P/E, 1.64X P/B and management guidance is a doubling of book value from 2006-2009! Acquisition candidate. Crude seems to have bottomed.

Telekom Indonesia ADR (TLK): 10.9X earnings and growing at 20% per year. Cheap emergng market mobile play.

- M

 

[CCdaCE]

Thanks everyone for your insight and comments... I still have to max. out the wife's Roth, before I let the trading hormones run wild.

-CC

 

[maddythebeagle]

I've looked at four of the ones you mentioned (USG, IR, CAT & NUE). They look okay, but to me they don't look bargain cheap either. Be sure to look at their debt since that will be important when their cyclical earnings decline. I think I remember USG having a lot of debt.

Others I've looked at as being "PE cheap" candidates but which I have not bought are Illinois Tool Works (ITW), Graco (GGG), Dover (DOV), Eaton (ETN), Lincoln Electric (LECO). I like ITW and GGG best as historically they seem less cyclical than the others. But I didn't like either enough to buy them. Just one more opinion . . .

I have a drip with Graco and have been adding...I have thought about adding ITW, Dover, or CAT...