The Motley Fool: Hold the dressing

June 4, 2014 by  
Filed under Wind Energy Tips


Q: What’s “window dressing”? – D.L., Sioux City, Iowa

A: It’s what some mutual fund managers do to fool most of us. Fund managers regularly report on their funds’ holdings every three or six months. Since they want to look good and impress existing and potential shareholders, some will sell poor performers they’ve held for a while and buy recent stellar investments. That way, someone perusing their list of holdings as of the end of the quarter might be pleased.

For example, perhaps the Kitten Kaboodle Fund (ticker: MEOWX) has been invested in some stocks that have plunged or been tied to scandals recently. If so, before the day on which the fund’s holdings will be recorded and later revealed, the managers might sell out of those dogs, snapping up shares of recent market darlings. This is window dressing. Favoring funds with low turnover ratios (i.e., relatively little trading activity) can thwart window dressers.

Name that company

I was created in 1930, but some of my businesses were making margarine, soap and soup tablets back in the 1800s. Today I’m a global giant; more than 2 billion people use my products daily in more than 190 nations. My brands include Lipton, Knorr, Dove, Hellmann’s, Vaseline, Brylcreem, Close Up, TRESemmÇ, Ben Jerry’s, Omo, Surf, Good Humor, Klondike, Q-tips, Popsicle and Slim-Fast. (I’m slimming down, and sold Wish Bone and Skippy.) Many of my brands have annual sales topping 1 billion euros. I employ more than 170,000 people, and 42 percent of my managers are women. Who am I? Last Week’s Answer: Apple.

Wind and rails

You get two industries for the price of one with Trinity Industries (NYSE: TRN). The company is primarily a railcar producer, building new railcars to replace all of those old graffiti-stricken ones traveling across the country delivering goods. But over the past few years, its energy division has been steadily growing. (It has other businesses, too.)

Consider the promise of its wholly owned subsidiary, Trinity Structural Towers, which fabricates tubular wind towers. While electricity produced from wind power in the United States was recently just 4 percent of all generated electrical energy, the U.S. Department of Energy believes wind could supply 20 percent of all U.S. electricity by 2020.

Based in Texas, Trinity Structural Towers is in a prime location to supply wind farms in the Great Plains, the wind-rich region that T. Boone Pickens has dubbed “the Saudi Arabia of wind.” Trinity’s backlog of structural towers orders totaled close to $270 million at year-end 2013.

With a price-to-earnings, or P/E, ratio near 12 and rising profit margins, Trinity’s stock is appealing. Its dividend that recently yielded 0.5 percent may not be exciting, but it reflects a hefty 33 percent increase.

Best of all is its diversification. Trinity’s railcar business can cushion any hiccup in its alternative energy business, and while wind power spreads, when large equipment needs to be moved across the U.S., it will likely be done by a Trinity Industries railcar.


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