August Tranche - FLR, LO and NSU

Time to continue my review of potential MFI stocks for August 2013 tranche.

FLR - this is Fluor, a large Engineering & Construction firm with over 40,000 employees. If you believe the US economy is poised to rebound, then FLR would certainly benefit from pent-up demand for large, capital-intensive projects.  One area being discussed a lot is Liquefied Natural Gas (LNG) so we can start exporting our Natural Gas to the rest of the world. They have a $9.5b market cap with 2.1b of cash versus $500m of debt. These construction firms often seem a bit cash-heavy; I do think they often collect some of the fees for major projects upfront. So it is not quite the same as Apple's cash hoard; as FLR's may be ear-marked to be buying supplies.  They are not as cheap as some other stocks on my list. FLR is trading at 12.7x next year's earnings.  I did a quick balance sheet check and all is well there. FLR seems like an interesting play to me.  Warren Buffett is buying stock in CBI, a competitor, so that gives the space a thumbs up.  There is a lot of cash sloshing around on corporate America balance sheets, at some point you gotta believe that will be used in part to build things - power plants, refineries, LNG terminals etc.  FLR will make the cut to next round.

LO - I know that cigarette smoking is gross.  Many will not buy their stocks due to dislike towards the marketing and product itself. While that is altruistic; I have been willing to buy from time to time and have had pretty good success. LO pays a 5% dividend, which instantly makes it attractive to me.  They trade at 12.5x next year's projected earnings, so pretty similar to FLR. They do have a bit more debt than cash, but are a steady cash-producing machine, about $1b per year (very steady) over past three years. I'd argue this is more of a defensive buy than FLR.  If economy takes a downturn, people will keep smoking; while engineering projects will be back-burnered.    Looking at the balance sheet, it is a wreck.  Somehow they have more liabilities than assets.  This does not seem sustainable, so I will simply move on... I can not just base decisions on income statement.

NSU - ok, I am aware that this is a stock that is currently in my August 2012 tranche AND it is my worst performer.  Also, precious metal names are pretty much damned right now. But they are SO cheap. I could not stand it if I sold them and then the market finally realized what a gold mine (ha,ha) they are and the stock soared.  Look at the stats. This is a 2.95 stock that is worth (per Mr Market) $587m.   They have $330m of cashola.  That is staggering. While I know the market is discounting Copper and Gold prices, they are trading at 5x trailing earnings and under 4x next years earnings as they transition more from a Gold producer to Copper. They have a 4.7% dividend.  They are a bit risky as they largely depend on a single mine.  So if anything happens (work stoppage, govt intervention etc) that would be problematic.  But I think they belong in a diversified portfolio. They will certainly make the next round.

So after a couple rounds, my remaining picks include AAPL, FLR, NSU, CF, KLIC and CYOU.  Still have WNR, MSFT, CVI, RPXC and ORCL to review.