Industrials sector was one of the top-performing S&P 500 industry groups for Tuesday (October 20). Particularly industrial machinery stocks such as Danaher Corp (DHR), Dover Corporation (DOV), Eaton Corporation (ETN), Flowserve Corporation (FLS), Ingersoll-Rand Plc (IR), ITT Industries, Inc. (ITT), Illinois Tool Works Inc (ITW), Parker-Hannifin (PH), and Pall Corporation (PLL) performed exceptionally on the bourses.
The Dow Jones Industrial Average (DJI) has gained in the last one month (1.74%), three months (11.59%), six months (24.84%), YTD (14.78%), and 1 year (12.39%) periods. Beyond that, the index performance is disappointing. Let's pick seven stocks that are likely to give handsome returns in the coming months.
Our stock universe
We limit the stocks to six sub-sectors namely Aerospace & Defense, Electronic & Electrical Equipment, General Industrials, Industrial Engineering, Industrial Transportation, and Support Services.
We will first see whether DHR, DOV, ETN, FLS, IR, ITT, ITW, PH, and PLL are likely to perform well in the coming periods. If so, we have picked our seven bulls if not then we will examine other stocks.
Danaher Corp (DHR): could be a $25 billion company by 2014
Danaher Corp. is a leading maker of hand tools and process and environmental controls. The company has four reporting segments: professional instrumentation (38% of 2008 sales), industrial technologies (26%), tools and components (10%), and medical technologies, formerly included in professional instrumentation (26%).
During 2008, the company bought 17 businesses for an aggregate purchase price of about $423 million, versus 12 businesses for $3.6 billion in 2007 and 11 businesses in 2006 for approximately $2.7 billion. YTD, the company acquired Tektronix Communications, Postec Data Systems Ltd, AirMagnet Inc, and PaloDEx Group Oy. The company has agreed to acquire Applied Biosystems/MDS Sciex, and MDS Analytical Technologies.
In its 2002 annual report, the company expressed its goal to reach $25 billion in sales by 2012. In the first half of 2009, the company's revenue significantly declined over the same period in 2008. Even after assuming that the company didn't suffer contraction in 2009 sales, the company is not likely to reach $25 billion by 2012. Yet, the quality of management, their focus on M&A, and business and financial fundamentals, make me believe that the company is likely to achieve its target at least by 2014.
Over the last 22 years, the company has rewarded shareholders better than GE, or Berkshire Hathaway. So, investors are likely to reap benefits when the company achieves its target. The company's stock closed Wednesday at $70.57 and the 1 year target price is set at $72. In fact, as of date, the company's intrinsic value per share exceeds $72.
