The Best Capital Goods Stock To Buy Now, +16.1% Upside

We review the best low price stock to buy now that is in the Capital Goods Sector and Industrial Equipment Wholesale Industry.

Transcript Below.

Hi everyone happy new year. Mathis Conner here with Conner Management Group. This week

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we're going to look at the best capital goods stock to buy right now. Today is Friday, January

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3, 2014. The industry of this capital goods company and is in the

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industrial equipment wholesale and we see the 12 month upside as 16.1%. Going

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on to the second slide and we see the name of the company is called MSC Industrial Direct.

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MSC industrial direct. And its ticker symbol is M S M. Let's see and as mentioned

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industrial equipment wholesale is the name of the industry and upside potential is at 16.1%.

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On to some quick facts about MSC. MSC together with its subsidiaries markets and distributes

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metalworking and maintenance repair and operations supplies primarily in the United States. Its

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MRO products, which is maintenance repair and operations, comprise include cutting tools measuring

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instruments tooling components metalworking products fasteners things of that nature. Things

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that are used to manufacture a lot of end retail type goods. We will see what some of

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the products are on there on the following slide. The website for MSC is MSC direct.com

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the company is headquartered in Melville New York founded in 1941. The number employees

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stand it 6,133. Another interesting tidbit is that the officers and directors the company owns 20.1% of the

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the company in total. Thats a nice chunk for a company the size is it still see in a second.

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They are in the services sector and once again the industry is industrial equipment wholesale.

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Their revenues the last 12 months have stood at $2.42 billion the net income was $249 million

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and the cash from operations was $335 million. The market capitalization for MSC is $5.1

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billion. This definitely a sizeble company. On to the products and services page is now got some pictures

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of the products that they market and distribute so just a lot of hard-core basic product used

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for manufacturing and maintenance. You've got pictures here of a vice, hand tools like a wrench, hole making items like

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drill bits, cutting tools, other kinds of machinery, saw blades, welding

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soldering equipment, HVAC fans, pipe related items like valve, janitorial and facility

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maintenance type equipment, frequently seen things like buckets with mops, and stuff like electric motors,

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power tools - just real hard-core basic stuff. One area to pick up in there business -they have

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one excerpt from the web site that says " emergency preparedness supplies". So you know you can

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imagine that with things like Hurricane Sandy and other disasters across

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the country, their products would be in great demand. So thats what we have for their products and

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services page. On to some of their metrics. As we mentioned annual revenues last 12 months

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has been spent $2.4 billion, net income 249 million, cash from operations 335 million. Their

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operating margins for 2012 was 19%. And the operating March 2013 declined slightly to

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18% - we consider that flat. On to the valuation metrics. The trailing P/E ratio for MSC stands

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at 20.4. The forward P/E ratio stands at 18.0 So we expect to see some some growth in earnings

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going forward. The PEG ratio is at 1.9. The Price to Sales ratio is 2.1. The Price to Book ratio is at 3.7. And the

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Enterprise Value to EBITDA ratio is 12.2. So the valuation metrics are

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aren't crazy cheap or expensive overall - just somewhere somewhere in the middle. The

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recent closing price of MSC stands at $80.74 and that was yesterday's close. The 52-week

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low was $71.44 and 52-week high as $87.92. The 20 day moving average is now at $79.67.

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The 50 day moving averages at $78.70. And the 200 day moving average is at $80.06. So that

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that is a pretty tight grouping which which reflects its overall tight trading pattern, over the past

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year. Right now the recent closing price of $80.74 is closer to the 52-week high of $87 than closer

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to its low. The average daily trading volume of MSC stands at 425,000 shares per day day.

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The beta of the stock is 1.0 basically implying that the stock has tended to move

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with the market fairly lock-step, up and down. The dividend yield is modest. It stands at

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1.6%. The average dividend payout ratio over the last five years has been on 31%.

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So taking at look at its chart for MSC, the stock has really just bounced between $76 and

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roughly $85 several times throughout the year. The stock started out around mid February

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around $86 dollars and then it fell to at $76 around late April then in rose to $84

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in late May then it declined again to $76 in early July and went through this cycle another two or three times

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until late December it got up about to $85 again and now its down around $80.

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So this stock has a flat pattern overall. It has

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bounced back and forth. But we see some some upside here some with expanded earnings.

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Also the operating margins are expected to increase the next of the next 1 to 2 years.

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They made an acquisition of another company. So they will be marketing and distributing

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some higher-margin products. The name of that was called Barnes.

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So on to the next slide. The financial statement quality of MSC we

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consider to be excellent. They have very good financials. The sales for the

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past five years have averaged 10.5% per year.

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Total debt stands about $300 million against $2.5 billion of

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revenue. That's fairly modest. We see the operating margins possibly increasing.

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Right now the operating margin trend is flat and the price trend is as flat as well.

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Now the overall market outlook we continue to see as bearish. We wouldn't be surprised at

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all to see some names pullback or there just not be much advancement over over the next

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quarter so, at least. So we'll see. The recent closing price of MSC right now stands

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$84.74 and we see its 12 month price target and $93.74. So the 12 potential at MSC we see as

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6.1%. Now the return is not high as some previous finds we've found but we think this is just

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a reflection of the market getting more expensive and there not being as is many upside opportunities.

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But nonetheless we still believe that MSC is the best capital goods company to buy

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right now. This is something for you to consider adding to your portfolio. If you are looking to do some

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diversification especially into this sector, the capital goods sector, this is a stock we think you

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should closely consider. And on to our last slide which is a just overall slide about Conner Management Group.

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This is just a reminder to check out our Saturday

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morning newsletter which you can get by going to www.gmcstockpicks.com and there you can hear

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about the best opportunities such as this one and other just general market information.

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All of our stock picks are driven by our proprietary algorithms where we look at over

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3500 stocks every week. We are pretty pleased with what we developed. We are new on the block

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and we are looking to show everyone just how good we are. So go to GMC Stock Picks.com to sign up

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for the newsletter and get that on Saturday mornings. We think you'll be pleased wit it.

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So that's all that we have for this week. Talk to you soon. Take care.