Stocks in the News: Construction Sector Continues to Grow

Posted: Sep 06, 2013 12:01 AM

Stock number one is: 

Louisiana-Pacific Corp., (SYMBOL: LPX) and the headline says: Louisiana-Pacific to buy Ainsworth Lumber for $1 billion -- Reuters

Louisiana-Pacific Corp. shares are up about 10% today, after the company agreed to buy Canadian wood products company Ainsworth Lumber.  The deal is expected to be accretive to earnings and cash flow in the first year.  “Ainsworth has the best margins among peers & gives Louisiana Pacific access to growing Asian markets, especially Japan,” says Deutsche Bank.

After five years of net losses, the company earned a small profit last year.  Current and future  earnings are expected to reflect aggressive growth, giving the stock a low PE of 14.5.

The stock price suffered a big pullback this summer since running up to $22 in March, and appears ready to stabilize. Expect resistance around $17.50 before any meaningful retracement occurs on the upside.

Our Ransom Note trendline says:  STAY ON THE SIDELINES.

LPX Chart

LPX data by YCharts

Stock number two is: 

L Brands Inc., (SYMBOL: LTD) and the headline says: Victoria the Secret Sauce for Solid August Comps – Morgan Stanley

L Brands, formerly known as Limited Brands, met Wall Street’s expectation today with  August same-store-sales up 2%, led by strong increases at Victoria  Secret and La Senza.  Other company brands include Pink, and Bath & Body Works.

Earnings are expected to grow in the low-to-mid teens over the next three years.  The PE is 18 and the dividend yield is 2.1%

L Brands’ stock broke out of a medium-term trading range in July and rose swiftly.  It’s consolidating now between $57 and $61.  There’s no compelling reason to chase shares at this point.

Our Ransom Note trendline says..... HOLD L BRANDS.

LTD Chart

LTD data by YCharts

Stock number three is:

Fastenal Company, (SYMBOL: FAST ) and the headline says: Fastenal Reports Surge in August Sales

Construction supplies retailer Fastenal Company reported a 7.2% surge in daily sales in August in a press release today, up dramatically from a 2.9% increase in July.  The increase came from a larger base of manufacturing and construction customers, and was slightly adversely impacted by Canadian foreign exchange rates.

Earnings are expected to grow in the low-to-mid teens over the next three years.  Fastenal Company is a growth and income value stock.

The shares have been trading sideways for 17 months after a huge run-up.  The chart has been bearish all summer.  Despite today’s big spike in the share price, Fastenal stock doesn’t appear ready to recover.

Our Ransom Note trendline says....  STAY ON THE SIDELINES.

FAST Chart

FAST data by YCharts

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.