Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. Keeping that in mind, here is one stock with lasting competitive advantages and two best left ignored.
Two Industrials Stocks to Sell:
Cummins (CMI)
One-Month Return: -2.9%
With more than half of the heavy-duty truck market using its engines at one point, Cummins (NYSE:CMI) offers engines and power systems.
Why Is CMI Not Exciting?
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Flat sales over the last two years suggest it must find different ways to grow during this cycle
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Gross margin of 24.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
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Diminishing returns on capital suggest its earlier profit pools are drying up
Cummins’s stock price of $662.53 implies a valuation ratio of 22.4x forward P/E. If you’re considering CMI for your portfolio, see our FREE research report to learn more.
Crown Holdings (CCK)
One-Month Return: +19.9%
Formerly Crown Cork & Seal, Crown Holdings (NYSE:CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products.
Why Does CCK Fall Short?
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Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 1.4% for the last five years
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High input costs result in an inferior gross margin of 20.3% that must be offset through higher volumes
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Earnings per share lagged its peers over the last five years as they only grew by 3.8% annually
At $113.28 per share, Crown Holdings trades at 13.7x forward P/E. To fully understand why you should be careful with CCK, check out our full research report (it’s free).
One Industrials Stock to Buy:
ATI (ATI)
One-Month Return: +2.8%
With its materials flying in nearly every commercial and military aircraft in service today, ATI (NYSE:ATI) produces highly specialized materials and components for aerospace, defense, medical, and energy applications using advanced metallurgy and manufacturing processes.
Why Will ATI Outperform?
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Impressive 11.1% annual revenue growth over the last five years indicates it’s winning market share this cycle
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Share buybacks catapulted its annual earnings per share growth to 24.8%, which outperformed its revenue gains over the last two years
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Free cash flow margin expanded by 21.7 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends