Every year right about this time I get the itch. For most
people that live in the Midwest it's the itch to get outside and
runaround. It's the urge to shake off that cabin fever that has
plagued you for the last four or five months. Maybe that's why
Chicago goes nuts and dyes the river green on St. Patty's Day.
We've been locked up for so long we just have to get out there
and do something crazy. (That river's green most of the year
I've got a different brand of crazy. This time of year I open
up the pocketbook, and usually the savings account, and spend
money on new summer tires, refilling the nitrous bottle, new
stereo equipment, basically anything that will upset my
girlfriend. As I thumbed through the racing parts catalogue
earlier this week it got me thinking. Maybe I'm not the only one
who is cracking open these pages looking for parts.
This winter was by any measure one of the worst in recent
history. I took a peak at the average snowfall map and laughed.
Chicago is supposed to get between 24 and 36 inches of snow on
average. Guess where we are as of last week? 79 inches. It is the
highest total snowfall on record.
Even though my car doesn't see the snow, the SUVs and pickups
with plows attached sure got a whole lot of work this winter.
There must be some publicly traded company that sells parts for
trucks that plow and I'm sure they are having a great earnings
season. What I found was the Captain Obvious of all stock
tickers. Take a guess. You got it,PLOW, the ticker for the
Year over year 4Q saw a 159% increase in sales, mostly
attributable to the increase in snowfall early in the season.
After living through what happened in 1Q 2014 I would bet that
this quarter sees some impressive numbers as well. And while
getting a new plow may not be as exciting as a new set of Mickey
Thompson 305 Drag Radials, it is good for Douglas Dynamics.
PLOW is a Zacks Rank #1 (Strong Buy) with two analysts raising
current year forecasts based on the strong snowy season.
Consensus for the year has risen from 79 cents to 95 cents per
share. Last quarter's earnings surprise of 52% is another
big reason for the rank.
PLOW just made a huge run from near $14 through previous
resistance at $17, approaching $18.50 before finally beginning to
pull back. This increased volatility since July of last year was
previously unheard of for Douglas Dynamics. A slow, steady
uptrend saw appreciation from $13 to $17 without any real scary
pull backs at all. The dip down below the 25 day moving average
shifted by 5 days (25x5 SMA) in January lasted less than a month.
Currently the stock is still in the middle of an intermediate
term uptrend, with the 25x5 below the price and in an upward
slope. The extreme overbought stochastics are begging for a
further sell off to support. Given the fact that $17 was a level
of resistance previously, look for that to be support for PLOW
should the stock get back down to that level.
Things have been good across the board for the industry. Right
now the AUTO/TRUCK-REPLACEMENT PARTS industry is number one in
our Zacks Industry Rank. So perhaps snow plows aren't the only
parts getting replaced this winter. Being the gear head that I
am, I find myself following the automakers often. One stat that
stands out is that the average age of cars on the road today.
It's now over 10 years. Eventually this pent up demand from the
Great Recession has to find its way out, but until then people
would rather fix their old cars than buy new ones. If you're
fixing old cars, you need parts. A major supplier of parts to
Advance Auto Parts and AutoZone is
Dorman carries a Zacks Rank #2 (Buy) after three analysts
raised current year estimates in the last 30 days. The Dorman
story has been slow, steady, consistent earnings growth over the
years. A quick look at the price and consensus chart shows the
solid growth numbers.
From a technical standpoint, DORM is in a similar position to
PLOW. However, DORM is a slower and steady story. A failed
sustained breakout of $50 saw the stock price retreat down below
$47 before finding enough strength to kick off a rally to a new
high at $56. Then there was another small seesaw down below $50
and back up through $56 to new highs at $60. What this stock's
history tells me is that support and resistance levels are not
firm and are relatively wide zones. It has a cyclical nature and
doesn't adhere to strict trend lines but overall has a nice,
fluttery, upwards motion. I wouldn't be surprised given the
stochastic sell signal from overbought territory earlier this
month, if the stock comes back down to test as low as $54 before
Rounding out my top picks in this leading industry is Zacks
Rank #1 (Strong Buy)
Motorcar Parts of America
(MPAA). MPAA specializes in manufacturing alternators and
starters for both domestic and imported autos. Earnings estimates
have been rising since last summer, helping the stock turnover
from a disappointing 2012. This year earnings are expected to
come in at $1.37 compared to an 85 cent loss per share last year.
The growth has been so good recently that MPAA has surprised to
the upside by no less than 33% over the last 3 quarters.
Hopefully the trend continues and we see another beat this
The technical picture for MPAA is the best of the bunch. A
steady uptrend, finding strength at the 25x5 each time, almost
perfectly aligned with a stochastic buy signal from oversold
territory every time. The most recent retest of the uptrend has
taken place in the last few days, with the stock dipping just
below $23 before beginning this latest run. Right now you have
the stock trading just above the 25x5 and just below resistance
at $27. This trading set up looks great right now and a tight
stop could easily be placed just below $24 with a target at $30,
close to 20% above where we sit now for a very attractive risk
DORMAN PRODUCTS (DORM): Free Stock Analysis
MOTORCAR PARTS (MPAA): Free Stock Analysis
DOUGLAS DYNAMIC (PLOW): Free Stock Analysis
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