In a special report on mid-cap turnaround plays, Chuck Carlson, editor of DRIP Investor, looks at an electric transmission firm and a maker of engineering products.
ITC Holdings (ITC)
ITC Holdings is the largest independent electric transmission company in the United States.
Through its regulated operating subsidiaries, ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas, and Oklahoma.
The firm services a combined peak load exceeding 26,000 megawatts along approximately 15,600 circuit miles of transmission line.
These shares are down 25% from their 52-week high of $44 per share. The stock is getting buffeted by the general weakness in utility-related issues and lower-than-expected profits in the last two quarters.
The firm blamed severe winter weather for some of its earnings shortfall. The company expects profits in the range of $2.00-$2.15 per share this year. I have been a long-time fan of these shares.
There is a need to continue to improve the utility and grid infrastructure in this country, and ITC is in a good position to benefit from that demand. The stock, with a market cap of around $5 billion, offers a yield of 2%.
While these shares may remain sluggish in the near term with the rest of the sector, the stock is offering an excellent buying opportunity for long-term investors.
Valmont Industries (VMI)
Valmonot designs and manufactures engineered products that support global infrastructure development and agricultural productivity, including irrigation equipment for large-scale agriculture and farming.
In addition, Valmont provides coatings services that protect against corrosion and improve the service lives of steel and other metal products.
Virtually all of Valmont’s businesses are in a cyclical slump, which is one reason these shares are down some 25% from their 52-week high.
However, such down periods are nothing new to the company and Valmont has shown the ability to rebound nicely as its economically sensitive markets improve.
The stock, with a market cap of just under $3 billion, yields 1.2%. I would feel very comfortable buying these shares in the $115 to $125 range and expect the stock to retest its 52-week high of nearly $164 per share over the next 24 months.
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