Hilary Kramer's Daily Picks & Pans

Friday, June 22, 2007 Guest blogger: Larry Schutts, vice president of Stockwinners.com and a contributing editor for Theflyonthewall.com. Larry looks for stocks with technical and fundamental characteristics indicating gains in the next 30 days. However, price movements may be volatile. He includes a stop-loss price in each post. Consider selling a position should the stop-loss be violated.

When corporate types start talking about expansion by acquisition, folks naturally think of the technology sector. The practice works just fine elsewhere, though. There is an outfit in Radnor, Pennsylvania that exerts much pressure in the gas distribution game, by virtue of more than 350 acquisitions over the past 21 years.

Airgas Inc. (NYSE:ARG) is the largest U.S. distributor of industrial gases, medical gases, specialty gases and welding equipment. It is also one of the largest U.S. distributors of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products. More than 11,000 employees work at over 900 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers.

The firm pleased investors earlier in the week, when it guided Q1 EPS to 61-63 cents, up from prior guidance of 52-54 cents. Analysts had been looking for 55 cents. The CEO attributed the move to stronger than expected same-store sales, which were running at 9% through May. He noted solid demand across the customer base, including the manufacturing and non-residential construction sectors. Banc of America Securities and BB&T Capital Markets subsequently declared the stock a "buy." ARG shares popped on the news and have now begun to define a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the issue with two "strong buys," six "buys" and three "holds." The ARG Price to Sales ratio (1.18), Price to Book ratio (3.34), Price to Cash Flow ratio (12.40), Sales Growth rate (14.32%) and EPS Growth rate (30.15%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 77% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $33.40 and $49.58. A stop-loss of $42.20 looks good here. Note that the firm is scheduled to release Q1 results on July 25, after the closing bell.

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