One of the recent trends I have seen in the market is some of the industrial and construction plays that have plunged with the price of crude oil are posting much better than expected results. These stocks are now staging impressive rallies that are only just beginning.
Given how severely and unfairly these shares were beaten up this is not surprising. Patient value investors are being rewarded for scooping up these cheap shares while panic engulfed everything connected to the oil and gas industry over the past few months.
These stocks might be early in a significant move as they still sell way below their levels before the energy complex started its descent during last summer. There is still time to catch their rallies as the stocks start to move closer to their fair valuations. Here are three of these contrarian stocks I own and still see further upside for over the next few months.
Let’s start with railcar maker Greenbrier Companies (NYSE: GBX). Back in early January I highlighted this manufacturer as being unfairly sold off on the decline in crude and told readers on Investors Alley to pick up these cheap shares before oil started to bottom and sentiment became more positive on these beaten down shares.
The stock is up more than 20% since then and slightly more than that since being included in The Turnaround Stock Report portfolio in December. However, the stock is still down some 25% from its highs late last summer.
The company easily beat top and bottom line expectations when it delivered its last quarterly results. In addition, Greenbrier’s order backlog continues to grow and is at record levels with 70% of new orders coming from outside the energy sector. The company provided earnings per share guidance during its last quarterly conference call of $5.20 to $5.50 a share in FY2015. This would be better than a 70% year-over-year increase over FY2014. Analysts believe another 10% to 15% gain is also in store for FY2016 which begins September. Even with the stock’s recent rally, the shares go for 11 times this year’s expected earnings, a significant discount to the overall market multiple despite Greenbrier’s superior growth prospects.
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