3 Industrials Stocks We Love to Hate

General Motors is a company that lots of people love to hate -- but one Fool analyst thinks that there might be diamonds under all that dirt. The new Chevy Colorado pickup could be one of them. Source: General Motors Company.

Sometimes a stock that "everybody hates" turns out to be a gem on closer inspection. And sometimes, we find that a stock is hated for good reasons. We asked three Motley Fool analysts to give their take on an industrials stock that some folks love to hate. Here's what they came up with.

Rich Smith: Which industrial stock do I love to hate? Perversely, it's the one called Joy Global .

Why do I "hate joy"? Because the modern, globally warming world hates coal -- and Joy Global is a big player in the market for coal-mining equipment, as well as equipment used for other mining endeavors.

But why do I hate Joymore than its mining and construction-equipment peers, like Caterpillarand Deere? Here's where the story turns to valuation.

Look at it this way: Right now, shares of Joy Global sell for about 13.1 times earnings -- roughly equivalent to the valuation on Caterpillar shares at 13.8 times earnings. But according to analysts cited on Finviz.com, Caterpillar is likely to grow its earnings at better than 11% annually.

Meanwhile, Joy is expected to see its earnings shrink by more than 3% annually over that same time period. Yet the two firms -- one growing, the other shrinking -- are being valued by investors almost equivalently.

That makes no sense to me.

At least Deere, which like Joy is also expected to see an earnings decline over the next few years, has the virtue of selling for a significant discount to Caterpillar's valuation (10.4 times earnings -- a 25% discount to CAT). And Deere pays a bigger dividend than Joy does, too. In fact, the rundown on dividends in this sector goes Caterpillar first at 3.3%, then Deere at 2.7%, and finally Joy -- dead last at just 1.9%.

So, that's the bear argument in a nutshell: earnings shrinkage, a too-high stock price, and a too-low dividend yield. Theyall addup to me loving to hate Joy.

Adam Levine-Weinberg: Both investors and the general public love to hate JetBlue Airways these days. Investors have been upset about JetBlue's below-average profit margin. Customers haven't seemed willing to fully compensate JetBlue for its premium amenities.

In November, JetBlue revealed a plan to boost operating income by $450 million by 2019. The two key changes are a new fare structure whereby the cheapest fares don't include free checked bags, and a cabin retrofit that adds 15 seats to each A320 aircraft.

Investors were somewhat mollified by this announcement. But they still weren't happy that some changes won't go into effect for several years. JetBlue still trades at a much lower price-to-sales ratio than Southwest Airlines, indicating that investors doubt it can match Southwest's margins.

JBLU PS Ratio (TTM) data by YCharts.

Meanwhile, a slew of consumer advocates and JetBlue customers now complain that the airline has lost its soul and given in to Wall Street greed. A recent survey of brand perception found that consumer sentiment about JetBlue has declined severely in the past year.

Both investors and customers have blown these issues out of proportion. For long-term investors, it's not a problem that JetBlue won't complete the A320 seat modifications until 2018. Meanwhile, consumers will gradually realize that despite losing an inch or two of legroom, they'll still have more space than they would on any other U.S. airline.

For the next few years, investors and consumers may continue hating JetBlue. But a decade from now, nobody will remember these issues. By then JetBlue should be back near the top of the industry in both profitability and customer satisfaction.

John Rosevear: General Motors is a stock that lots of people love to hate -- but I'm not among them. I happen to think that the General is a pretty good buy right now.

Here's why. Behind the haze of last year's recall scandal -- and cable news' Obama-haters endlessly relitigating GM's 2009 bailout -- GM is actually getting its act together.

A new management team led by CEO Mary Barra is giving GM the disciplined, buttoned-down approach it has desperately needed for decades. The company that famously didn't know how much it was spending or earning now has cutting-edge financial controls in place throughout its sprawling global operations -- and disciplined financial management that is keeping costs down, but not at the expense of making great products.

That was one of GM's biggest problems for years. GM's infamous "bean counters" were at endless war with the "car guys," as they sought to cut costs from products that they expected to be less than competitive. The upshot was generation after generation of compromised products that needed fat margin-killing discounts to sell.

We know where that drama ended -- in U.S. Bankruptcy Court. New GM does things very differently: Drawing on its deep and widely respected (within the industry) R&D teams, GM is now building cutting-edge products that earn rave reviews and delight customers -- and importantly, that its dealers can sell without the fat discounts of years past.

The upshot? If we set aside the costs of those recalls, GM's operating profit margin in North America was 9.5% last quarter-- better than that ofFordand other key rivals. Barra has promised to improve on that result in 2015, while whipping GM's long-broken European operation into shape and boosting its huge Chinese presence with profitable new SUVs and Cadillacs.

Long story short: You can hate GM if you want, but you'll be missing out. As the recall mess starts to fade in history's rearview mirror, I think more and more investors are going to see what's good about GM in the year to come.

The article 3 Industrials Stocks We Love to Hate originally appeared on Fool.com.

Adam Levine-Weinberg owns shares of General Motors and JetBlue Airways andhas the following options: long January 2016 $80 calls on Apple and short January 2016 $120 calls on Apple. John Rosevear owns shares of Apple, Ford, and General Motors. Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Apple, Ford, and General Motors and owns shares of Apple and Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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