Reiterating: Stanley Works, on likely economic recovery

Posted Jun 27th 2009 12:10PM by Joseph Lazzaro
Filed under: Products and Services, Consumer Experience, Stocks to Buy

I'm reiterating my Buy rating for Stanley Works (NYSE: SWK), first recommended on February 10, 2009, at a price of $32.88.

New Britain, Conn.-based Stanley manufactures tools for professional, industrial, and consumer use, and has built a business model that's been successful for more than a hundred years. A security solutions unit accounts for about 30% of revenue, but the key revenue driver here is tools: hammers, screwdrivers, sockets, saws, and measuring tape, among other products.

The $22 sell/stop loss held, and Stanley remains well-positioned to increase market share in three key customer markets, particularly as major economies start to recover in Q3/Q4 2009. Hence, it's time to get on board Stanley's train, which is headed to at least $50 per share by the end of 2010. The First Call FY2009/FY2010 EPS estimates for SWK are $2.31 to $2.82.

Stock Analysis: Stanley Works s a moderate-risk stock. Consider buying a 50% position in SWK now; then buy another 25% in four months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your SWK position before October 2009. Sell/stop loss if you were to buy shares in this company: $22.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Stanley Works, SWK, tools