Construction Industry a Home for Variety of Small Cap Stocks

Photo courtesy of catalin on upcall.co

Much was made in the media recently of the  construction of the exoskeleton of 1 World Trade Center, which, topping out at 1,271 feet, makes it 21 feet higher than the Empire State Building, according to the New York Times (http://www.nytimes.com/2012/04/30/nyregion/1-world-trade-center-will-reclaim-the-sky-in-lower-manhattan.html?_r=1). For many months the building, also called Freedom Tower, has been and will continue to be the workplace of a variety of construction teams and workers which, at Smallcapworld, serves as a reminder that construction-related activities are the focus of many diverse small cap companies specializing in a variety of trades.

Here are four companies heavily involved in construction, in one form or another. They were selected randomly and we have no connection to any of the companies included in this blog post.

Minneapolis-based Apogee Enterprises (Nasdaq: APOG, http://www.apog.com) designs and develops glass products and services in North America and Europe in two segments: Architectural Products and Services, and Large-Scale Optical Technologies. The architectural segment installs and maintains the outside skins of commercial and institutional buildings. APOG was recently featured in stockpker.com as one of “5 stocks insiders love right now (http://stockpickr.com/5-stocks-insiders-love-right-now.html-9). Average volume is 117,000 shares a day but it has recently been higher. 52-week range is $7.79-$16.44 and market cap on May 8 was $455 million. It closed May 8 at $16.17, up 1 cent on the day.

Houston-based Comfort Systems USA (NYSE: FIX, http://www.comfortsystemsusa.com) is in the commercial heating, ventilating and air conditioning (HVAC) business. It specializes in large scale office buildings, retail centers, apartment complexes and manufacturing centers. The company was founded in 1917.  On May 2, FIX announced a $0.05 a share dividend for shareholders of record at the close of business May 14. Average daily volume is about 111,000 shares a day and market cap is $364 million. It’s 52-week range is $7.81-$13.05. FIX closed May 8 at $9.95, up 13 cents on the day.

Humboldt, KS-based Monarch Cement Co. (OTCBB: MCEM.OB, http://www.monarchcement.com) manufactures and sells portland cement under the MONARCH brand name to residential, commercial and governmental customers. Founded in 1908, its chief customers are based in the Midwest. The stock is very thinly traded–only about 2,250 shares a day. Its 52-week range is $20.51-$28.50 and market cap is about $99 million. MCEM closed May 8 at $24.69, down 31 cents for the day.

Melbourne, FL-based Goldfield Corp. (Nasdaq: GV, http://www.goldfieldcorp.com) engages in the electrical construction and real estate development business throughout the U.S. Its electric business includes building transmission lines, concrete foundations, distribution systems and substations and other electrical installation systems for utility systems. Goldfield also installs fiber optic cable. Its real estate business includes the development of residential condominium projects, mainly in Florida. Goldfield Corp. was founded in 1906.  GV trades about 227,000 shares a day and has a market cap of about $32 million. GV stock was upgraded from hold to buy by TheStreet Ratings in April. Its 52-week range is $0.24-$1.29. GV closed May 8 at $1.31, up 11 cents on the day.

Cars: Yes — But Wait, There’s More!

Now the auto suppliers have started to throw their hats into the bailout ring, but don’t paint every company in this niche as a beggar with the same stroke. Tim Aeppel of The Wall Street Journal describes how fierce competition and strict requirements from the Big 3 forced many companies to seek opportunities beyond the auto market. http://online.wsj.com/article/SB123327563723431309.html?mod=googlenews_wsj

Here are a few midwestern companies whose no-nonsense approach and diversified markets may give them an upside that can outperform the better-known automotive supplier, whose eggs tend all to be in one big basket.

Northville, MI-based Amerigon (Nasdaq:ARGN, http://www.amerigon.com) has developed a seat warming/cooling technology that is a feature in over 20 well-established vehicle lines. But don’t think of them as just an auto supplier. They are working to include a variant of their technology into Sealy’s (NYSE:ZZ, http://www.sealy.com/) bedding products. They are a leader in the field of thermoelectrics, which uses advanced circuitry to create temperature change via an electric current.  Intel (Nasdaq:INTC) recently announced a breakthrough by embedding a thermoelectric device on a computer chip, which is likely to have huge efficiency and cost benefits for the future of electronics  http://www.spectrum.ieee.org/jan09/7572.  Amerigon is leading a team of top scientists to use thermoelectric principles to transfer exhaust into electricity.  ARGN closed 2/06 at $4.26, down from a 52-week high of $20.37, with average trading volume of over 200,000 shares.

The $209 billion aerospace industry, which is anticipating growth of 8-10 percent over the next 10 years, is a potential life preserver for those who had the foresight to diversify. http://www.crainsdetroit.com/article/20090205/FREE/902059971/-1The medical device market is another opportunity – a ball bearing is a ball bearing whether it goes into a car or artificial hip. Though not that simple, Elkhart, IN-based CTS Corporation (NYSE:CTS, http://www.ctscorp.com/) is a diversified manufacturer that will make the transition to these growing markets easier than its peers. It trades at $5.16 which is near its year low, and down from $13.99 as a 52-week high – but you might compare future cash flow to diversified manufacturers, not just to auto supply.

Chicago-based LKQ Corporation (Nasdaq:LKQX, http://www.lkqcorp.com/home/home.asp) salvages OEM products for the aftermarket repair market so it combines the green and frugal spirit of the day. Not a bad place to be as consumers hold off on big purchases and hold on to their vehicles for longer.

Racine, WI-based Modine Manufacturing (NYSE:MOD, http://www.modine.com/) designs thermal management components, and although they serve the auto parts sector, only a third of revenues come from its automotive division, with the rest divided among the heavy equipment, heating/ventilation/air-conditioning (HVAC), electronics and fuel-cell markets. Its diversification strategy began in the mid 90’s.  MOD closed 2.06 at $2.03, down from a year-high of $19.60, on volume of more than 360,000 shares.