Since I first discussed Stanley Works (SWK) here on February 10, 2009, at a price of $32.48, the shares have pulled-back roughly in-sync with the Dow's recent retreat. But they have since found support near $50, and I obviously still like the shares. Here's why.
Look for experienced, battle-tested Stanley Works to post a nearly 100% revenue increase in 2010, mostly on the strength of its Black & Decker acquisition, but also as the tool sector benefits from strong growth in emerging markets. A factor that's up in the air? The status of the U.S. economic expansion in the second half of 2010.
Further, rare is the day you will find a steadier performer than New Britain, Conn.-based Stanley. The tool and hardware manufacturer is sort of a microcosm of the industrial ascension of the United States. Stanley is a low-profile, highly productive manufacturer of tools and hardware for consumer and industrial use: Hammers, screwdrivers, saws, pliers, wood planes, measuring tape -- and now power tools. The craftsmanship and durability of it products is renowned.
A 43% international revenue component means Stanley has a strong presence in key, faster-growing emerging markets. The First Call FY2010/FY2011 EPS estimates for SWK are $3.67 to $4.65.
Technically, SWK's move back above the key, 50-day moving average after its mid-2010 pull-back bodes well for further stock gains.
2010 Outlook: I view Stanley as a long-term play, but if investors are looking to sell SWK within the year, it's probably best to take your profits after it rises to $67 to $69, if it fails to clear $70.
Stock Analysis: I consider Stanley Works to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in SWK now, then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my SWK position before September 2010, and I'd put a sell/stop loss at $33.
- -
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Driving with Ford (F): A Favorite Speculation
Higher Meat Prices Are Fueling Food Inflation
Are We in a Recession or a Depression?
Add your comments