As stated coming into the week I want to redeploy some funds from weaker areas to stronger, and diversify the portfolio into sectors I have had little exposure to. One such area is industrials. This is not normally an area I ply except for a few names, and Cummins (CMI) is one of them. While an American global corporation, this engine company definitely gives a nice exposure to emerging Asia, as they were in India and China before it was fashionable. [Sep 23, 2007: Stock to Watch: Cummings Hitting on all Cylinders] Unfortunately, the company still has heavy exposure to the U.S.

Technically, the stock spiked 2 weeks ago in a stellar quarter and I thought missed another one. But with the market weakness it has come back to fill the gap and now sits at the 20 day moving average. I am hoping this first purchase of a 0.6% exposure under $69 is a 'loser' and the stock drops a more - at least to the 50 day ($64s) where I'd be adding. If that support breaks I will have to reassess but for that to happen I think this selloff will need to be of the '8 to 10%' variety. Which certainly can happen. If so, purchase in the low to mid $50s should be very possible. For today I just went to create a starter stake and this purchase is more on fundamentals than technicals.

id=BLOGGER_PHOTO_ID_5468194287129897842

Fundamentally, this might have been one of the best 'beats' of the quarter on the bottom line (40 cents) as a huge amount of costs (read: human beings) were taken out the past few years [Feb 11, 2009: WSJ - Cummins Engine Shifts Gears Amid Stall] (Full report here).

EPS estimates for 2010 have been raised from $2.49 (30 days ago) to $3.10 (7 days ago before quarter) to $3.53. 2011 is currently over $5.11. Of course if the world goes into a new tailspin we know these numbers mean nothing but for now it is what it is.

  • Engine maker Cummins Inc. Tuesday reported sharply higher first-quarter profits on improved sales in fast-recovering markets like China and India, and the effect of restructuring charges in the year-ago quarter. The company also raised its 2010 sales forecast.
  • The company said it earned $149 million, or 75 cents per share, up from $7 million, or 4 cents per share, in the first quarter of 2009, when it posted restructuring charges of $66 million. Sales rose to $2.48 billion, up 2 percent from $2.44 billion. Analysts surveyed by Thomson Reuters expected quarterly earnings of 35 cents per share on revenue of $2.42 billion, on average.
  • Cummins said that three of its four business divisions showed improved profits in the quarter. The biggest improvement was in the engine and components unit.
  • Cummins saw a higher demand for its products in China, India and Brazil, primarily among manufacturers of trucks, construction and power-generation equipment.
  • One weakness for Cummins remains the North American market.
  • For all of 2010, Cummins now expects sales of $12 billion, up from prior guidance of $11 billion. Analysts expect $11.32 billion of sales.

Long Cummins in fund; no personal position