Mueller Water Products (MWA) makes just about anything that has to do with the transmission, purification, measurement and distribution of water. Its growth is directly related to new housing starts, which are on a sharp increase.
The company was recently listed as one of the top four small-cap stocks in the industrial equipment and components industry with the highest cash. BB&T Capital Markets notes MWA’s discount to the housing group and targets the stock at $8.50 over the next 12 months. On July 30, Mueller reported fiscal third-quarter earnings that increased net sales by 8.5% and operating income by 25.4%.
I first recommended MWA as one of the “Top 6 Stocks to Buy for July” following a jump from a five-month consolidation on a breakaway gap that vaulted the stock from $6 to $7.75 in May. It retraced that breakout and following a CBR (proprietary indicator) buy signal, early in June, jumped almost $1.80 to $7.91. Last week it found support at its 50-day moving average at $7.25 and bounced to $8.02. Now, at under $7.62, MWA appears capable of breaking to a new high.
Note the strong MACD buy signal and the frequent pops of high-volume buying. I’m increasing our trading target to above $10 with a buy-under of $8. Long-term investors could benefit by holding this stock.