Auto Hybrids Are Great: But What’s Next? – Tesla Motors Inc (TSLA), Cummins Inc. (CMI), Sasol Limited (SSL)

Cummins Inc. (NYSE:CMI)

As noted earlier, the USA is currently in the initial stages of tapping its vast natural gas deposits.  If Sasol’s technology produces a real price decrease in diesel or if natural gas vehicle use increases Cummins, a personal favorite is poised to benefit.  Looking at My Caps page one can see it’s one of only a handful of my “top picks”.

While this company isn’t really in the disruptive category it would stand to benefit from any sort of increased use of natural gas or diesel engines in either the commercial or residential auto sector.

Is that speculation enough to buy this company?  No-but the fundamentals, management, products, and growth certainly do justify getting in for the long term.

It’s rare that you find a company with so many wonderful attributes.  Here are just a few highlights.

Management: A great management team focusing on increasing the customer base, global growth, re-investment, and improving margins.

Products: a top quality product that will be demanded for decades to come.  On top of engines they make power generation systems that are indispensable in many industries.  Besides the manufacturing of products they are also the top servicer of those same products to the tune of about 30% of their total revenue—that’s dependable recurring revenue.

Growth: A fast growing global company.  One of the first western companies to gain a foothold in China decades ago Cummins could be positioned to play a China recovery better than anyone.  Before it was popular Cummins was also focused on the developing countries.  Look for rebounds in any of these regions to have a positive impact on Cummins top line. With upwards of 60% of it’s sales now coming from outside the USA this is truly a global growth play.

Conclusion:  There are so many great things about Cummins.  Therefore, I’m giving them my highest rating.  Strong Buy and Long Term Hold.

It’s not a question of if a new technology will come to dominate a certain aspect of the market but rather when will that shift occur and with what technology.  Tesla’s electric vehicle platform offers a real significant shift that consumers could begin trending toward in the coming years.  I further believe that natural gas engines and diesel engines will continue to dominate the commercial market, which will benefit Cummins.  Finally, the most efficient diesel producers will obviously maintain advantages in margins and this points to Sasol with their GTL technology.

The article Auto Hybrids Are Great: But What’s Next? originally appeared on Fool.com and is written by James Catlin.

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