In a nervous market trading right near its high, it’s worth looking for value. But there’s not a lot of it around, as stocks are fully priced and expectations for earnings are modest.
One company we’ve looked at before is Chart Industries, Inc. (GTLS) out of Garfield Heights, Ohio. This business manufactures specialized equipment for the production and storage of hydrocarbons and industrial gases. It’s a good business to be in these days and should make for a decent long-term investment.
This is a $2.0-billion company whose share price is down substantially from its all-time record-high set last October. It’s not that this business isn’t growing, but only that the position sold off after not quite meeting consensus.
I like this business and its long-term fundamentals. Energy end-products represent about 53% of the company’s total sales.
The company has also developed specialized expertise in cryogenic storage, which is equipment that can produce temperatures close to absolute zero (-459 degrees Fahrenheit).
Most of Chart Industries’ customers are large, multinational producers of hydrocarbons and gases. The company’s top-ten customers account for 37% of total revenues.
Biomedical customers are 23% of total sales, including respiratory products, cold storage systems, and commercial oxygen generation systems. As a global manufacturer and seller, just less than 60% of total sales are generated by international customers.
You can learn a lot about this business by reading its Form 10-K annual report for 2013. Chart Industries’ share price appreciated 550% from October 2010 to October of last year. It’s now more fairly priced. The company’s stock chart is featured below:
This is a very good track record for this kind of mature business, and the expertise the company has developed—both in-house and through acquisitions—provides decent barriers to entry for any competition.
All stocks experience periods in which they don’t meet the hype of Wall Street expectations and they get punished for it. But one or two quarters of not meeting consensus doesn’t mean that the underlying business isn’t a good one. (See “Are Good Businesses Always Good Investments?”)
That’s the case with Chart Industries; a company that’s selling a lot of product to China.
The position looks to be in its own downtrend, and the grinding that’s going on in the broader market represents a jitteriness that could very well lead to a correction.
With this in mind, the company’s valuation isn’t unreasonable. One Wall Street firm recently increased their earnings estimates on the company for the second quarter.
I’d definitely put this enterprise on a watch list. Having broken its simple 200- and 50-day moving averages, more downside seems likely over the near-term.
Energy production, storage, and transportation boasts excellent fundamentals for the rest of this decade. While it’s still early stages in the liquefied natural gas (LNG) build-out, a company like Chart Industries should be a major beneficiary of the infrastructure being created to ship LNG overseas.