A Stock for the Long Haul
Kelley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In my mind, there are a few companies that are akin to stock market royalty. They are not big growth stocks or stocks that will triple your money over the course of the year, but they are high-quality companies whose stock you can buy and practically forget about, and right now one of my favorites is on clearance. PACCAR (NASDAQ: PCAR) just might be my favorite stock, and right now it is trading at 11 times earnings and is currently about 30% off its 52-week high.
So let me start with the bad news. On July 26th PACCAR released its earnings report and missed analysts expectations by 3 cents a share. This triggered a sell off, from which the share price has yet to recover. There are also concerns about a recession affecting truck sales in Europe, which CEO Mark Piggot mentioned in the latest earnings release: "Recent Eurozone economic uncertainties have resulted in lower industry truck orders." To put this in perspective, truck sales in Europe were responsible for just under 30% of total revenue in the latest earnings report. Sizable, yes Worthy of a 30% drop in share price? I don't think so, unless you figure they will not make a single sale in Europe due to the recession.
Now, for the good news. In October, PACCAR reported the highest quarterly revenues in company history. Their year over year third quarter earnings were also up over 100%, and they announced a $.70 extra cash dividend (over and above their regular $.18 quarterly dividend) which reflects this growth. PACCAR has also done some hiring. Between the April and October earnings release, they have increased their employee base by over 20%. All of these signs point to solid growth.
The trucking industry as a whole has also had some positive news. According to the American Trucking Association, seasonally adjusted truck tonnage is up 6% year over year for November and they report that lean inventory means more work for truckers. Trucking is a great bellwether stock for the economy, and as long as the demand for trucks is high, PACCAR will profit.
Overall, PACCAR is a great company. They have been family-run for over 105 years, they have offered a dividend every year since 1941, and they have had 72 consecutive years of profit. This all adds up to a solid company. In addition, they are also both expanding and innovative. PACCAR is a company that is interested in global growth and has moved into South America, India, and China. In addition to this expansion they have created stratigic alliances with companies like Westport Innovations (NASDAQ: WPRT) to offer liquid natural gas engines and other more sustainable technologies.
I think PACCAR is very cheap right now, and I would be surprised if it stayed below $40 a share for long.
Kelley Ryan is long PACCAR.