For those betting on a breakout in the industrials space, one trader has a way to ride the economic recovery and increased demand in the sector.
Todd Gordon, founder of TradingAnalysis.com, says under-the-radar industrials stock Shyft Group could deliver even more gains.
"They make and assemble specialty commercial and recreational vehicles," Gordon told CNBC's "Trading Nation" on Tuesday. "They operate under two divisions, fleet services and specialty chassis and vehicles. The fleet services make commercial vehicles that are used as delivery trucks, servicing quite a few industries including e-commerce and last-mile package delivery. … The chassis division makes various chassis, most notably they do them for a diesel motor homes, which are in huge demand right now."
Shyft has a $1.18 billion market cap and is expected to pull in nearly $675 million in sales in fiscal 2020. Its fleet vehicles and services segment makes up roughly 61% in total revenue, while its specialty chassis and vehicle business generates 21%.
The fundamentals also look strong, Gordon said. It trades at 31 times trailing earnings and 20 times forward earnings. The Nasdaq, which holds the stock, has a 37 times forward multiple.
"The chart looks good," said Gordon. "We came all the way from $2.61 low back here in 2016. And if we do a little bit of simple channel analysis … you can see that the company is respecting some support and resistance, generally moving higher in an uptrend channel."
"We are a little overbought here, the move has been made, $22 or $23 would be a better entry here, [but] I do want to get involved because we do have a bit more upside until channel resistance is met into the mid to higher $40s, potentially even $50 depending on that angle of ascent. So I like to get a partial position now in Shyft and look to add later," said Gordon.
Shyft has rallied 15% this year. The stock trades above $32 and a move to $50 implies 54% upside.
Disclosure: Gordon holds SHYF.