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Takeaway: We are adding Wabtec (WAB) to Investing Ideas on the short side.

Please be advised that we are adding Wabtec (WAB) to Investing Ideas on the short side today. Our Industrials Sector team lead by Jan Van Sciver will send out a full stock report to subscribers next week.

WAB: Adding Wabtec to Investing Ideas (Short Side) - z wabtec

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In the meantime, here's a brief background note from CEO Keith McCullough:

One thing I am very certain of is that the Federal Reserve can't print growth. 

 

So we want to stay with our best Industrial and Cyclical Ideas on slow-volume bounces. Wabtec is still on Jay Van Sciver's SELL list. As a refresher, his contrarian short call on the stock was recently updated as follows:

WAB: They See A Downturn Coming?

WAB announced a large, long anticipated acquisition of Faiveley. A few thoughts:

1.  The deal is likely to make strategic sense, unlike some of WAB's other recent transactions.

2. The driver for getting this deal done ('why now?') may be the need to plug a hole in the freight rail outlook.  In that sense, it may be a sign of weakness - acquisitive industrials push acquisitions when they need them.

3. The price doesn't seem that bad, particularly in light of the recent dollar strength, although WAB is issuing equity.  Issuing high multiple equity for lower multiple equity is a classic roll-up strategy.