It seems like the boring names in the economy could be the ones to attract the attention and capital from all sorts of investors, both retail and pros. But the big guys on Wall Street may be interested in some of the manufacturing and industrial names in the economy today.
Because of these same reasons, you will see how and why Goodyear Tire & Rubber (NASDAQ: GT) could be the best stock to consider in your portfolio of upcoming "boring names" to make sure your capital is not only well-protected in this potential money shift but also exposed to above-average rates of growth.
Hit the snooze button
With a VIX now at levels not seen since 2019, it is not the time to be a hero and look to trade in and out of the markets; neither is it the best choice to go out looking for unreasonable growth stories.
Instead, read over the latest quarterly reports from firms like BlackRock Inc. (NYSE: BLK) and The Goldman Sachs Group (NYSE: GS), who have seen net outflows in their ETF businesses, perhaps as they are keen to trim some profits now that the S&P 500 and NASDAQ have hit all-time highs.
They must put this newfound liquidity to work elsewhere, and it won't be in the technology names accredited with bringing the indices to their new high levels. It will probably find its way into the Industrial Select Sector SPDR Fund (NYSEARCA: XLI), but how can you be sure?
Sponsored by Fed interest rate cuts, which, according to the FedWatch tool at the CME Group (NASDAQ: CME), could come as soon as May of this year, there could soon be a breakout in demand for American products, delivering rising profits to manufacturers like Goodyear as a result.
If that wasn't enough of an incentive, remember that there is no other growth story like Goodyear in its sector, and this one makes sense.
Low oil prices today can act as a cushion for the business to retain its high margins and returns on capital; just consider the price target of $17.2 a share set today, which calls for a 27.5% upside from where the stock sits today.
Double-checking
The only worthy adversary to share in the significant market share Goodyear has in the tire and rubber market is Bridgestone Corp. (OTCMKTS: BRDCY), a stock that analysts don't seem too excited about compared to Goodyear.
Analysts believe this stock can grow its earnings per share by roughly 19.1% in the next 12 months; double-digit growth in the market presented today is attractive. However, Goodyear quickly steals the spotlight in that department.
The smaller of these two, at a $4 billion market capitalization (versus Bridgestone's $29.8 billion), Goodyear brings a proposition for 53.8% EPS growth in the next year, significantly above its competitor's.
While it's hard to believe that a tire company could make such a massive jump, you now know that analysts have set double-digit upside in their price targets for a reason.
Bridgestone stock trades at 96% of its 52-week high prices, leaving little room to move higher before hitting that resistance wall. On the other hand, Goodyear only trades at 82% of its 52-week high, giving you enough room to let the stock catch up to the pack.
Bridgestone sells for a price-to-book value of 1.3x, a 30% premium. Goodyear stock is on a firesale price of 0.8x P/B, reflected as a 20% discount! This discount also matches analysts' expected upside.
