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Published: August 28, 2009
Investors hooked on green energy, government
spending, and developing economies are looking in the right
place.
They just aren't looking at the right stock.
When the global economy slammed on the breaks, General Cable
(NYSE: BGC) took it on the chin. It slid from $60 to the
mid-$30s. But the global economy won't be stuck in neutral
forever. Investors who want to profit from the next runaway
leader in a growing $150 billion industry have a chance to pick
up two shares for the price of one.
General Cable provides one-stop shopping for companies that need
copper, aluminum or fiber-optic wires and cables., materials
with a dizzying array of industrial applications, including
broadband internet, high-voltage power transmission and other
maritime, mining, petrochemical and aerospace uses. Its 46
plants around the world rack up more than $6 billion in annual
sales.
General Cable has made ambitious moves into new markets and
developed ground-breaking products. It managed to generate more
than $225 million in operating cash flow last year, much of
which was plowed into joint ventures that could yield big
payoffs down the line.
None of this seems to be reflected in its stock price, though.
This presents a strong opportunity. General Cable has
successfully navigated downturns for the past 150 years it has
been in business. Its positive long-term outlook outweighs any
short-term negatives.
The International Energy Agency says the world's governments
will spend more than $14 trillion in the years ahead on power
generation, transmission and distribution equipment to meet the
world's growing need for electricity. General Cable is poised to
cash in on that building boom.
General Cable is uniquely positioned to benefit from the
transition to renewable power sources. Last year, the firm sold
more than $400 million worth of cables connected to land-based
wind farms The offshore wind market could grow as much as
six-fold during the next four years, with 20 gigawatts of new
projects already in the pipeline. In anticipation of this,
General Cable opened a new submarine power cable plant. Its
order backlog already totals hundreds of millions of dollars.
In addition to wind energy, solar power capacity is expected to
balloon 150-fold in the next two decades. Solar farms require up
to five times the amount of cable as wind farms on a
watt-for-watt basis.
Energy infrastructure is only part of the equation. Consider the
amount of wire needed to bring broadband internet service to
Latin America or support oil and gas exploration in Sub-Saharan
Africa.
Although General Cable has years of growth ahead, that doesn't
mean it has nothing cooking right now. Last quarter's earnings
of $1.00 a share obliterated Wall Street's 56-cent forecast.
The shares have been trading for less than book value until
recently. It comes as no surprise that top executives have been
buying large blocks -- not only through share buybacks with the
company's money, but also in their personal accounts.
BGC vaulted more than +20% after last month's earnings shocked
the market -- capping an exhilarating +450% surge since
November. I think this rally is still in the early stages.
It's hard not to like General Cable if you understand the
potential of renewable energy, the expansion of IT
infrastructure and flurry of construction in emerging markets.
These trends all collide right at the company's front door.
Volatile commodity prices and a poor environment for big
industrial projects are weighing on the stock. Management
concedes the global economy may not have bottomed yet. But this
gives patient investors the opportunity to pick up this industry
leaders at less than six times cash flow.
-- Nathan Slaughter
Editor
Half-Priced Stocks |
