Better quarters are ahead for Oshkosh

Expect good things ahead for special purpose vehicle manufacturer Oshkosh. Earlier this year the company won a $1.05 billion contract from the U.S. Army to fund production of 2,224 MRAP all terrain vehicles for the Afghanistan War.

Follow-on contracts are expected in the years ahead, which will push OSK defense revenue to well over $5 billion in FY2010. The First Call FY2009/FY2010 EPS estimates for OSK are a loss of 58 cents to a profit of $3.12.

Technically, Oshkosh's stock chart is strong. However, the stock is due for a breather: it traded as low as $3.85 earlier this year. A short-term double-top also could be forming at $35, a point of resistance, but it will be minor. Hence, the view from here argues to buy OSK on a pull-back to $31-32, but it would not be totally unpleasant if you established 25% of your position right here, at/near $33.

Finally, the Sell/Stop Loss has been raise to $17 from $7, or to just below cost.

Stock Analysis: Oshkosh Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in OSK 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 OSK position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $17.


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