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Durable Goods Remain Near Highs

 

Durable Goods Orders continue impressive strength holding near record highs even with drop in Aircraft as Motor Vehicles/Parts and mfg Machinery revised higher. Both Motor Vehicles/Parts and mfg Machinery posted record highs as tariff policies result in factory builds on US soil after a period strong reshoring activity post-COVID. Economic trends favor industrials and related issues. The Light Weight Vehicle cycle at 16Mil SAAR remains below prior growth periods in which 17.5-18Mil SAAR was routine at far lower population levels. I expect at some point that we are likely to see month reporting near 20Mil SAAR. Toyota, the #2 Brand in the US, remains in very tight supply at less than 30days of inventory to sales as many others still have 2024 year vehicles on their lots.
My favorite in this space remains Cooper-Standard(CPS) priced 0.19x Pr/Sales with a 2yr expectation of 1.0x valuation once investors reprice CPS’s fundamentals. However, 2.0x 3-4yrs out dependent on management’s M&A activity is possible.