Investors can sometimes get caught up in chasing what appear to be the hottest stocks to buy now - but they can turn out to be the biggest mistakes.
You see, at any given time in the stock market there are the darling stocks that are making new highs and have exciting new products rolling out.
These stocks often carry huge risks.
They're often so richly valued that they are totally disconnected from any rational valuation of the business. They're more like bets in the world's largest popularity contest than ownership interest in a business.
There are a couple of those that are easy to spot today.
Those stocks may be exciting, but by the time they've hit mainstream news due to their high share prices and new products, investing in them is like placing chips on a roulette wheel - the odds aren't in your favor.
Why to Look for Boring Stocks to Buy
Quite often boring can be much better for your financial health.
Unless you're experienced enough to do some active trading, finding good companies with solid financials in a steady business and holding them for years rather than hours or days can be much better for your net worth.
Individual investors have a significant advantage with these stocks in that they do not have to engage in the quarterly portfolio comparison and performance derby and can hold stocks long enough for the value of the business to grow over time.
That's why I like the looks of a certain "boring" stock that's involved in industrial hardware, security products, and metal castings.
But there's nothing dull about its long-term profit potential...
"Boring" Stock to Buy Now
The "boring" stock to buy I'm talking about is The Eastern Company (Nasdaq: EML).
The company operates in three segments. The Security Division includes Greenwald Industries, which makes coin acceptors and metering systems to secure the cash used in self-service laundry facilities, primarily in the Americas. The Illinois Lock company makes custom-engineered locks for a variety of original equipment manufacturers and is a leading producer of keyless locks sold under well-known brand names such as Sesamee, Presto, and Husk. These products are sold all around the globe.
The Industrial Products Division includes the Eberhardt Group, which supplies latches and latching systems to original equipment manufacturer (OEM) companies primarily in the automobile and truck industry. Products include handles and rotating latches for military and first responder vehicles and other specialty vehicles. They also make latches for toolboxes and covers for cars and trucks. This division also includes the Canadian Commercial Vehicle Company that makes fabricated products used for transportation, construction, and industrial and technology applications.
The Industrial Services Division makes anchor products used in underground mines. The rock anchors are also used in the construction industry for tunneling, securing cross-country transmission towers, and hydro construction. They also make iron castings to customer-engineered specifications for the industrial hardware, pipefitting, construction, and railroad industries.
These are not in and of themselves particularly exciting businesses. It is highly unlikely that the talking heads on TV will spend a lot of time discussing the future of rock anchors or toolbox latches on the morning business shows anytime soon. Your neighbors will not be talking about the exciting stock they found in the door handle business at the next backyard BBQ, either.
However, this a solid company that will see demand for its products and services at every point of the economic cycle. Profits should expand rapidly when the economy accelerates over the next few years.
The company has been around in one form or another since 1858 and has weathered a wide range of economic and market conditions.
EML is poised to see its stock price take off with a stronger economy. The stock has caught the eye of some very successful investors as the funds of Charles Royce and Mario Gabelli have been accumulating the stock this year. Quantitative firms like Bridgewater Capital and Renaissance have also been buying the stock.
EML has been consistently profitable over the past decade - a claim not too many corporations can make in the aftermath of the recession. During that time revenue has grown by more than 50%, while earnings have more than doubled. Dividends have grown by almost 40%, while debt levels fell by about 75%.
The company's shares are very reasonably priced at just 14 times earnings and 1.5 times book value. The company also pays a dividend and is currently yielding 2.4%.
Now for some cheap stocks to buy that could double your money...