Paccar: An Emerging Markets Play

Truck manufacturer Paccar Inc's (PCAR) recovery continues, and that's a major reason I'm reiterating my buy rating for the company's shares, first recommended on July 6, 2009 at a price of $30.81.Look for Paccar's revenue to increase in FY2010, after bottoming in FY2009, as economies in North America, Europe, and in emerging markets continue to recover.

Further, Paccar should receive an added tailwind during the current economic expansion from more-strict environmental regulations: those more-rigorous emission standards will encourage companies to replace at least some trucks ahead of schedule. The First Call FY2009/FY2010 EPS estimates for PCAR are 23 cents to 91 cents.

Technically, Paccar's stock chart looks is strong -- an uptrend, with only minor, corrective pull-backs, and a stock price that's almost always above the key, 50-day moving average -- the latter of which indicates institutional investors (IIs) are adding to/establishing PCAR positions. True, Paccar did fall below the 50-day MA to close out 2009, but most of that was year-end profit-taking by short-term IIs: PCAR traded below $21 earlier in the 2009 before rising to $40. Hence, view the pull-back as a Buy opportunity.

2010 Outlook: Paccar is a long-term play, but if you're looking to sell PCAR within the year, take your profits after it rises to $44.

Stock Analysis:
Paccar Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in PCAR now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your PCAR position before March 2010. Sell/stop loss if you were to buy shares in this company: $17.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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