Barron’s Stock Pick: Equipment Maker Terex Is a Cheap Bet on an Economic Recovery

Investors betting on a cyclical recovery in the global economy would love to be able to cherry-pick industrial companies.

That would be

Terex

(ticker: TEX), a manufacturer of equipment used in construction, mining, maintenance, and other industries. It is a small-cap industrial with a strong balance sheet and the potential for profit growth. And its stock is cheap.

If you know the name Terex, it may be because of its cranes. Businesses including cranes accounted for half of the company’s sales in 2015. But those divisions had operating profits of 4% or less that year. So the following year, a new CEO, John Garrison, set about slimming down Terex’s portfolio.

“We developed a strategy predicated on focus, simplifying, and executing to win,” Garrison tells Barron’s.

What’s left is a company that is leaner and potentially more profitable through economic cycles.

Today’s Terex comprises two main segments. The larger one

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