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It's a market than remains the province of those who make astute calculations and who can tolerate moderate risk (or high risk). This market has demonstrated that it can certainly frustrate -- and humble -- institutional investor and individual investor alike.
Moreover, perhaps the most memorable dimension to the bear market that began in October 2007 will be its ability to take down the stocks of healthy companies with demonstrated business models.
Chicago Bridge & Iron (NYSE: CBI) is one such business model. A global, engineering, procurement and construction company that specializes in turnkey projects for customers that produce, process, store and distribute the world's natural resources, the market hammered CBI as it became clear that emerging markets, a key CBI customer, had entered a recession. The First Call F2009/F2010 EPS estimates for CBI are $1.64 / $1.42.
In general, analysts expect F2009 revenue to decline about 20-25%, but the view from here argues that's a bit too pessimistic. Should energy markets rebound, institutional investor sentiment regarding CBI will turn in a hurry -- and certainly take it to levels well above $20 per share. Given that CBI currently trades in the $7-9 range, that's a favorable risk/return.
Stock Analysis: Chicago Bridge & Iron is a moderate-risk stock. Consider buying a 25% position in CB now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CBI position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $3.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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