Things are starting to look up for truck manufacturer Paccar Inc. (NASDAQ: PCAR), which is why I'm Reiterating my Buy rating for the company's shares, first recommended on July 6, 2009 at a price of $30.81. If you bought Paccar in July, you're up about 22%.As expected, Paccar's revenue will start to increase in FY2010, after bottoming this year, as economies in North America, Europe, and in emerging markets continue to recover.
Further, Paccar should receive an added tailwind during the next economic expansion from more-strict environmental regulations: those more-rigorous emission standards will encourage companies to replace at least some trucks ahead of schedule. The First Call FY2009/FY2010 EPS estimates for PCAR are 21 cents to 97 cents.
And, as one might deduce, institutional investors (IIs) are aware of the above, and they've bid-up PCAR's shares basically throughout 2009.
Technically, Paccar's stock chart looks beautiful: a strong uptrend, with only minor, corrective pull-backs, and a stock price that's almost always above the 50-day moving average – the latter of which indicates IIs are continuing to add to their PCAR positions. Further, PCAR, which has already tested resistance at $40, will encounter psychological resistance at $50, but this is just a pit-stop. PCAR is headed much higher during the economic expansion.
Stock Analysis: Paccar Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in PCAR now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your PCAR position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $17
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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