While the consumer cyclical sector as a whole has struggled in 2024, some stocks have managed to outperform, attracting the attention of investors. The energy sector has shown the largest year-to-date return at around 11.60%, while the consumer cyclical sector has declined by about 3.19% during the same period. Within the consumer cyclical space, the vehicles and parts industry has had the second-worst performance, with a return of -8.73%. Despite these challenges, there are some individual stocks that have outperformed the S&P 500 by at least 15% year to date.
One such stock is Allison Transmission Holdings Inc. (ALSN), which has shown strong performance relative to the benchmark index. Founded in 1915, the company manufactures automatic transmissions and hybrid propulsion systems for commercial vehicles globally. In 2023, Allison Transmission reported record revenue and earnings, with net income of $170 million for the fourth quarter and $673 million for the full year. CEO David Graziosi attributed the company’s success to strong demand in key markets and the dedication of its team. The company is projecting net sales in the range of $3.05 billion to $3.15 billion for 2024, with continued growth expected.
Despite its strong performance, Allison Transmission carries a significant amount of debt at $2.51 billion, with a cash pile of only $555 million. However, the company does have a good interest coverage ratio and a perfect Piotroski F-Score, indicating healthy operations. The stock has gained around 45% year to date, with a price-earnings ratio of 11.06 and a dividend yield of 1.15%. The stock is considered significantly overvalued based on historical ratios and analysts’ projections, but has good outperformance potential according to the GF Score.
Investors have shown mixed interest in Allison Transmission, with some gurus selling off their holdings while others, such as Ray Dalio’s Bridgewater Associates, maintaining or increasing their positions. Insiders of the company have also been selling off their shares, but this activity may not necessarily indicate a negative outlook for the stock. Overall, despite its overvaluation and selling activity among investors, Allison Transmission has strong fundamentals and operations that should continue to drive its outperformance in the future.
In conclusion, while the overall consumer cyclical sector may be facing challenges in 2024, individual stocks like Allison Transmission have managed to thrive. Despite concerns about valuation and selling activity among gurus and insiders, the company’s solid performance and growth outlook suggest that it has the potential to continue outperforming in the coming months. Investors may want to keep an eye on Allison Transmission as a potential opportunity in the current market environment.
