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The President said something recently that Jim Cramer thinks could lead to a further rally in a niche area in the market.
That is, in the middle of February, President Obama ordered the development of tough new fuel standards for the nation's fleet of heavy-duty trucks as part of what aides say will be an increasingly muscular and unilateral campaign to tackle climate change through the use of the president's executive power.
According to a report in the New York Times, the new regulations, to be drafted by the Environmental Protection Agency and the Transportation Department by March 2015 and completed a year later so they are in place before Mr. Obama leaves office.
When Jim Cramer heard about these developments he immediately asked himself how it might impact stocks.
And after careful consideration, Cramer thinks it could generate a significant tailwind for a bull market already underway in a niche area of the market – trucking.
That's because the Obama initiatives aren't the only catalyst.
According to Cramer's proprietary research, there are other tailwinds. For example:
- Demand for trucks remains 19% below peak.
- The average truck is 6.7 year old; that's older than the historical average of 6 years.
Therefore, Cramer believes as the vehicles age and demand improves, truck sales should increase. Then, add to that, the new mandate coming from the White House and Cramer thinks trucks sales could absolutely sky-rocket.
You see, considering the recovery underway and the age of the trucking fleet, "when the new fuel standards go into effect, I see trucking companies feeling compeled to buy new vehicles."
If that's not bullish, Cramer doesn't know what is? Of course that begs the question, who wins?
"I think the single the best way to play a rebound in North American heavy duty truck sales is Paccar, " Cramer said.
Although there are other stocks that leverage the theme, Cramer prefers Paccar because about .
"These Class 8 trucks are the area that's really heating up right now. In other words, Paccar has the most exposure to the hottest part of the truck bull market," Cramer said. "If the North American truck market rebounds like I'm expecting over the next few years, then Paccar's earnings could end up being dramatically higher than the analysts are anticipating—I'm talking about $1.22 of incremental earnings per share from this year through 2017, and that's pretty significant considering that the company's only expected to earn $3.61 for 2014."
Of if you're looking for another idea, Cramer also likes Cummins, however he adds, "only 26% of Cummins' sales are related to heavy-duty trucks. "
And in case you're wondering, Cramer says avoid Navistar. "The company's just made too many missteps in recent years, and management doesn't have the track record to justify buying this laggard truck maker."
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Now, just because Cramer likes a stock, that doesn't mean he thinks it's immediately a buy.
"Paccar and other truck stocks have really roared lately, and if you pay up, you will be chasing. We don't chase on Mad Money," Cramer said. "Instead, I'd put it on the shopping list and raise some cash so you're ready for the next pullback."
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