Buy: Pentair (PNR) Quantum Score: 72.4 Buy-up-to Price: $82.28 Position Size: No more than 4% of capital Risk Point: $61.26
Last time I checked, we all need water.
And last time I checked, that's never going to change.
I'm a big water drinker myself. In fact, it's mostly what I drink, except for my complicated but nutritious morning smoothies – okay, and a nice bourbon from time to time.
Today, we're adding a quality company that helps the world "sustainably move, improve, and enjoy water, life's most essential resource."
Pentair's (PNR) portfolio of solutions enables people, businesses, and industries to access clean, safe water, recover and reuse water, and reduce water consumption.
The company operates in two business segments:
Consumer Solutions designs, makes, and sells energy-efficient residential and commercial pool equipment and accessories and commercial and residential water treatment products and systems. It goes beyond water and pool pumps to also provide automation systems, lighting, heating, and more. (Yes, there's an app for controlling your pool.)
The Industrial & Flow Technologies segment makes and sells a lot of different fluid treatment and pump products and systems for residential, commercial, and industrial markets – agricultural spray nozzles to wastewater reuse systems to advanced membrane filtration, and more. It also provides gas recovery solutions.
Its Everpure filtration systems is used by chefs, franchises, national foodservice operators, the hospitality industry, and more.
With a Quantum Score of 72.4, Pentair is right in our buy zone, and I like its across-the-board strength in technicals and fundamentals.
Source: TradeSmith Finance and MAPsignals.com
In the last fiscal year, sales dipped slightly (less than half a percent) but have grown 11.3% over the last three years. Earnings growth, however, has been much more robust at 29.2% last year and 23.9% over three years.
We have any short-term earnings risk behind us, as Pentair reported earnings on Tuesday and beat expectations thanks to price increases for water purifiers. Management also reiterated its guidance for full-year profits, which are in line with estimates.
Analysts expect a slight bump in sales this year with a bigger bump next year. Same with earnings, which are expected to increase a consistent 13% this year and the next. It's not blow-the-roof-off growth, but its consistent and reliable. I also like the healthy 15% profit margin, which helps earnings grow faster than sales.
Those solid fundamentals helped push shares up 45% over the past 12 months, which gives PNR its strong but not overheated Technical Score of 73.5. The nearly 49% rally the last six months has been impressive.
Institutions own 96.1% of PNR shares, and as you would expect, the Big Money has been actively buying since late last year with 13 buy signals (green bars below) since Dec. 8.
In fact, there were multiple buy signals a year ago at this time, followed by selling in the September-October volatility, and now back to buying.
Source: MAPsignals.com
You can see PNR's blue price line pull back after hitting an all-time high of $85.81 on March 28. It now trades about 8% below that price, which is the kind of pullback we like to pounce on to add cream-of-the-crop stocks like PNR.
Buy PNR up to $82.28 with our initial Risk Point at $61.26, which is based on TradeSmith's Volatility Quotient of 22.45%. Remember, that is a trailing Risk Point that will automatically adjust upward as the stock rises. Should it ever close below its Risk Point, I will reach out and let you know what to do next.
PNR pays a small divided, currently yielding 1.2% and which the company increased by 4.7% last year. That's not why we're buying it, but we'll take any money anybody wants to give us, right? Shares just went ex-dividend on April 18, so we'll have to wait a few months for the next payout.
Most of all, we're looking for the strong rankings to drive the stock higher in the coming months and add to our profits. I'll be back soon with a video talking more about PNR, our Quantum Edge Pro portfolio, and this more volatile market.
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