Is Chicago Bridge's Stock Headed to $40 and Beyond?

Posted Feb 7th 2011 1:40PM by Joseph Lazzaro
Filed under: Stocks to Buy

Steady as she goes with Chicago Bridge & Iron (CBI), which I first wrote about on April 6, 2009, at a price of $7.31, which has pushed through psychological resistance at $30.

Further, obviously if you're in near $7.31 or at a dollar-cost-average below $14, now may be a good time to consider taking some profits off the table with CBI.

However, those investors who can tolerate the risk can hold on to their full position in CBI go for a possible larger gain. I'd also raise the sell/stop loss to $22 from $18 at this stage.

Chicago Bridge specializes in projects that produce, process, store, and distribute the world's natural resources. Liquid natural gas, refining project revenue should perform adequately, and now strength appears to be building in Canadian oil sands projects, less-so with shale gas/unconventional gas projects. Overall, 2011 revenue should rise 15% to 20%.

The Thomson Reuters First Call FY2011 EPS estimate for CBI is $2.34.

Technically, Chicago Bridge's stock chart is strong -- an uptrend, and one that rarely dips to the key, 50-day moving average, a sign that institutional investors are not waiting long to add to positions in CBI.

2011 Outlook: I view Chicago as a long-term play, but if you're looking to sell CBI within the year, it's probably best to take your profits after it rises to $38 or $39, if it fails to clear $40.

Stock Analysis: I consider Chicago Bridge & Iron 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 50% position in CBI; I'd put a sell/stop loss at $22.

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