3 Reasons to Buy This Company
Mar 18th 2013 1:00PM
Updated Mar 18th 2013 1:06PM
What is it that you look for in an investment? Is it the opportunity to realize a return on your investment? Maybe it's a company with a global presence? Then again, maybe you focus more on the less measurable goals, like the culture and ethical and environmental practices of the company?
Today, I'd like to introduce you to a company that -- should you be interested in any one of these three characteristics -- could fill that niche: engine and component manufacturer Cummins . Read below to see what I'm talking about, and at the end, I'll offer up access to a special premium report on one of the companies Cummins works closely with to help bring a new type of engine to the world.
Spending the money where it counts
I could spout off a whole bunch of numbers to you -- like how much Cummins revenue grew or shrank last year, or how much earnings and margins are improving. Surely, there is merit to these numbers, but I'm going to focus on why this company should be successful over the long-term for a different reason: sustainability.
Recently, The Motley Fool named Cummins as the best company in America. One of the reasons it was picked was because it has found a way to synergistically do well as a company by doing good for the earth and its inhabitants.
Cummins is one of the leaders in creating low-emission and alternative fuel engines. It's partnership with natural gas engine designer Westport Innovations -- dubbed Cummins Westport -- is but one highlight of the company's commitment to alternative energy. The company is actually taking things one step beyond the partnership, attempting to build a natural gas engine of its own.
As it stands now, Cummins already has engines that meet EPA, European Union, and California Air Resources Board regulations for emissions. It states in its annual report that it will continue to make investments that allow its engines to be the most efficient, cleanest emitting in the world.
Being so far ahead of the game has already paid off financially for the company, as fellow engine maker Navistar was forced to start buying Cummins engines when the EPA doubled the fines for trucks that were non-compliant (as Navistar's were) on emissions standards.
If you're a long-term investor, you have to know that such investments in research and development -- based on making the world we live in a cleaner and more balanced place to live -- are indeed wise ones for the coming decades.
As the world continues to change, it's also important to consider the global presence that a company has. As several countries have begun to spend more on building out infrastructure and adopting Western ways of living -- for better or worse -- Cummins has been there to meet demand.
And if countries like China, India, and Brazil continue to adopt Western ways of consumption, they'll have to do it while consuming less fuel and emitting fewer toxins -- something Cummins is ready and willing to help with.
As it stands now, these countries don't make up too much of the company's revenue.
But that doesn't mean that Cummins doesn't already have inroads into these locations. When you zoom in on sales from joint-ventures -- Cummins primary way of gaining a foothold in these countries -- you'll see that it has a focused strategy that now accounts for about 30% of all engine sales in 2012.
An investment you can feel good about
Finally, Cummins represents an investment that you can actually feel good about. I recently wrote about how I will likely be selling my shares of Coca-Cola for the simple reason that -- with a baby on the way that we are going to discourage from drinking soda -- I simply didn't feel right profiting from increasing sales of the company's sugar water.
And though Cummins' focus on environmentally friendly engines is enough to make it a winner in my book, the company goes far beyond that. The company's employees appreciate the work-life balance encouraged within the culture, and appreciate the steps it is taking to be a better citizen of the world.
Consider that in the last four years, because of concerted efforts, Cummins has been able to:
- Reduce water consumption of the company's global divisions by 45%
- Reduce hazardous waste produced by the company in the United States by 52%
- Reduce landfill waste by the company globally by 28%
When you put all these things together, you can see why many an investor can feel good about owning a piece of this company.
Why don't I own it?
To be honest, Cummins has always been on my radar, but it wasn't until the Motley Fool's piece on the country's top companies that I became more interested. Instead, I have been paying more attention to Westport Innovations.
As the most advanced designer of engines powered by natural gas, Westport Innovations is a small company with a big goal: To lead the world in transitioning away from traditional oil-based fossil fuels in favor of abundant, cheap, and clean natural gas. The company has a price tag large enough to match its ambition, and will need to grow revenue quickly in order to justify sky-high expectations. To help you determine whether Westport Innovations is right for your portfolio, The Motley Fool has just released a brand-new premium report breaking down the company's opportunities, competitive advantages, and risks. To get started, simply click here now for instant access.
The article 3 Reasons to Buy This Company originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Coca-Cola and Westport Innovations. The Motley Fool recommends Coca-Cola, Cummins, and Westport Innovations. The Motley Fool owns shares of Cummins and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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