Top Picks 2020: MasTec (MTZ)

01/16/2020 5:00 am EST

Focus: INDUSTRIALS

Richard Moroney

Editor, Dow Theory Forecasts

Last year, Richard Moroney selected Diodes (DIOD) as the Top Pick from his small-cap focused advisory service, Upside Stocks; the stock rose 69% and he still recommends the shares. For 2020, he turns to an engineering and construction company.

A leading infrastructure construction firm, MasTec (MTZ) is family-owned and leveraged to two massive markets — communications and energy.

The company believes it is the largest wireless infrastructure provider, installing towers and antennas for such major carriers as AT&T (T), Verizon (VZ), and T-Mobile (TMUS). MasTec is benefitting from the rollout of 5G networks and the proliferation of small wireless cells.

The stock earns a Value score of 88, ranking it among the cheapest 12% of the more than 4,500 stocks in Quadrix. That score is up from 72 at the start of year even though shares have rallied 57% through Dec. 29.

MasTec trades at just 13 times trailing earnings, 31% below the median for industrial stocks and 21% below industry-group peers in the S&P 1500. The stock trades at a significant discount to its five-year median P/E of 18.1 and 10- year norm of 17.2.

If MasTec’s trailing P/E ratio reverts to its five-year median of 15 and management meets the consensus 2020 profit estimate of $5.52, the shares would reach $83 over the next 14 months. The stock is a capital gains favorite for 2020.

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