Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Lennox International Inc. (LII), AAON, Inc. (AAON): Stocks for a Hot Summer Day

This summer has been a scorcher in the western states. Las Vegas and Salt Lake City have set record temperatures in the past month. Even Death Valley, the site of the hottest temperature ever recorded on Earth, is getting close to its record high of 134 degrees. Rangers at Death Valley have even had to clean large amounts of partially-cooked eggs off of the sidewalk. Apparently, you can’t fry an egg on a rock, even if it is 129 degrees.

Lennox International Inc. (NYSE:LII)

These record temperatures haven’t caused too much trouble for those individuals lucky enough to have access to quality air conditioning systems, however. The following companies make money by keeping you cool.

The biggest of the bunch

With a market cap of $17.7 billion,

Ingersoll-Rand PLC (NYSE:IR)

is by far the largest of the companies we’ll look at today. This Irish company is in the business of creating safe and comfortable environments. Air conditioning systems for residential users are only a small piece of the company’s climate control business.

Looking at the company’s most recent annual report you will notice that they have $7.3 billion dollars worth of shareholder’s equity. That is a decent amount in relation to the company’s market cap.

If you look more closely at the company’s balance sheet, however, you will see that over $10 billion of the company’s assets are not tangible. Not to say this company’s intangibles don’t have value, but if they were subtracted from the equation  then the company’s equity would be negative by over $3 billion.

The company generated $665.1 million of net income in 2012, well above its 2010-2012 average of $550 million. It hasn’t posted negative earnings since 2008. In that year, net income was negative by approximately $2.6 billion dollars. This was a result of the company taking a write-down on the value of its intangible assets in the amount of $3.275 billion.

The high level on intangibles on this company’s balance sheet worries me. Additionally, this company has the lowest returns on equity, both during the trailing twelve months and over a five-year span, of any company I will be discussing.

Another mediocre option

Lennox International Inc. (NYSE:LII)

is another option for investors looking for a piece of the climate control sector. Sales of residential heating and cooling systems make up 46.6% of the company’s revenues. The remainder is almost evenly split between commercial heating and cooling, and refrigeration.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.