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Kennametal Inc. (KMT), Lincoln Electric Holdings, Inc. (LECO), Reliance Steel & Aluminum (RS): The Four Best Mid-Cap Industrials for Your Money

Steel fabricator a good buy-and-hold investment

Reliance Steel & Aluminum (NYSE:RSoperates metals service centers serving the general manufacturing, non-residential construction, transportation, aerospace, electronics, and semiconductor industries. In the June quarter, it derived 58% of sales from the sale of carbon steel products, 17% from aluminum, 15% from stainless steel, and 10% from alloy.

Tonnage sales from each product category, with the exception of alloy, all rose by more than 20% year-over-year in that quarter. A recent acquisition, Metals USA, assisted growth and ought to support profit gains over the long haul.

Reliance Steel & Aluminum (NYSE:RS) has the best near-term liquidity position among these four stocks, with a current ratio of 3.8. It might well look to make further external asset purchases while investing in facilities and equipment.

At the same time, conditions in Reliance Steel & Aluminum (NYSE:RS)’s core markets ought to improve to some degree. I expect that the company will keep growing its market share and revenue, leaving it well-positioned when the environment is more favorable. At a trailing P/E of 15.6, the shares still deserve a spot in investors’ portfolios.

Utility pole maker on a solid growth path

Valmont Industries, Inc. (NYSE:VMI), a producer of steel and aluminum poles primarily for the irrigation and utility markets, is structured as follows:

  1. 31% of second-quarter sales were derived from its irrigation segment.
  2. 29% of sales were generated by its engineered infrastructure product segment (lighting and traffic products).
  3. 26% was contributed by the utility-support structures segment.
  4. 11% was generated by the coatings segment

Valmont Industries, Inc. (NYSE:VMI)’s share earnings advanced a whopping 49% year over year during the first six months of 2013. Its three major operating divisions are all growing profits at robust rates. This comes after the company grew revenue and earnings at 20% and 37% clips, respectively, over a three-year span.

It should continue to perform well, partly thanks to the addition of manufacturing capacity for its utility business. That unit’s healthy prospects are based on the upgrading of the U.S. electrical grid.

Valmont Industries, Inc. (NYSE:VMI) will seek out opportunities to use cash for productivity gains, capacity expansion, and acquisitions, as well as a modest dividend.

The stock is a good selection for price recovery as it persists along a growth trajectory. At a trailing P/E of 12.8, it is attractively valued.


My favorite within this screen result is Valmont Industries, Inc. (NYSE:VMI), which makes a solid choice for those with aspirations of six-month to one-year price gains. The other three are fundamentally sound companies that will probably continue to fare well. In particular, Lincoln Electric Holdings, Inc. (NASDAQ:LECO) offers long-term price upside for those with a more extended horizon, as does Reliance Steel & Aluminum (NYSE:RS). Finally, Kennametal Inc. (NYSE:KMT), having come off an outstanding growth stage recently, still holds appreciation potential going forward.

The article The 4 Best Mid-Cap Industrials for Your Money originally appeared on and is written by Damon Churchwell.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends Kennametal.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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