Market Monitor: Chris Bertelsen, Aviance Capital Management Chief Investment Officer
All three picks have attractive valuations and are expected to rise double digits over the next 12 months —
My first pick is Mastec [MTZ], a 4 billion market cap cyclically sensitive name that is in the sweet spot of the cycle now and I believe for the next 18 to 24 months. It is cheap [13X earnings], fast growing company servicing 2 of the hottest businesses, telecom/data and Energy. Last quarter showed both top and bottom line growth as well as optimistic guidance. In telecom MTZ is a beneficiary of the 5G rollout and the need for faster communication hard wired options [gigabit, first net]. In addition they are working on upgrading our antiquated electrical grid. In the energy area, pipelines for moving oil and gas from unconventional sources [Fracking] as well as Wind Farm projects. Cash flow, liquidity and backlogs are impressive.
My second pick is Rio Tinto [RIO] which is a pure mining stock and a 5 year market underperformer, very much priced for low expectations with an 11.5 P/E and an attractive 5.0% yield. RIO is a huge Iron Ore, Bauxite [aluminum], copper, uranium and diamond producer which stands to benefit from growth world wide in the middle class and world growth in general. Finally since 2007 highs, the 10 year consolidation and inventory drawdowns effecting the mining business is seeing firming prices and real commodity/material demand. At last the 2 more recent quarters are showing earnings and sales increases. A beneficiary of higher inflation as inflation is the “grease” that helps this company raise its prices.
My third pick is Western Digital [WDC] which is a stupid cheap Tech opportunity at 7.6 times earnings with a modest 2.3% dividend yield. WDC benefits two ways, the first from the steady, albeit slow growth Flash Memory business [from the SanDisk purchase]. The second way is from the fast growing enterprise storage/cloud business. Without storage there is no cloud [yes servers and switches are needed as well] and WDC is a leader with impressive quarterly growth. I see WDC as the best “cheap growth” opportunity.