This article is a reprint of my 14 August 2008 RealMoney column

I know, I know … the construction industry should not be touched with a 10-foot pole right now. But the depth of conviction investors have in that belief sends my contrarian side looking for names that might buck conventional wisdom. I didn’t have to look far to find one.

Despite a market capitalization under $800 million, NCI Building Systems (NCS) is one of North America’s largest integrated manufacturers and marketers of metal products for the nonresidential construction industry. With 44 manufacturing facilities located in 18 states and Mexico it sells metal coil coating services, metal components and engineered building systems, offering one of the most extensive metal product lines in the building industry.

The metal-coil-coating segment cleans, treats, paints and slits continuous steel coils before the steel is fabricated for end use. The metal-components segment sells metal roof and wall systems, metal partitions, metal trim, doors and other related accessories. The engineered building systems segment manufactures mainframes and Long Bay Systems, and includes value-added engineering and drafting. This last segment is both the largest and the highest-margin business for NCI.

NCI management pursues a four-pronged strategy of (1) developing new markets and products; (2) successfully identifying strategic growth opportunities; (3) controlling operating and administrative costs; and (4) managing working capital and fixed assets. The limited focus seems to be working.

New market opportunities include the shift toward metal roofing systems from conventional tar and gravel systems. Though more expensive to install, metal roofing systems are more durable and require less maintenance. As a result, they are gaining share in commercial-building applications.

For NCI, “strategic opportunities” means just that. The 1998 acquisition of Metal Building Components Inc. doubled its revenue base, making the company the largest domestic manufacturer of nonresidential metal components. The 2006 acquisition of Robertson-Ceco II Corporation resulted in product and geographic diversification, a stronger customer base and a more extensive distribution network.

Control over operating and administrative costs is exemplified by the fact that SG&A expense declined from 18.1% of revenue in the first half of 2007 to 17.7% in the same period this year. Meanwhile, working capital has been reduced, as have expenditures on fixed capital.

The operational discipline is translating into financial success. Sales in the second quarter grew 13.1% from the year-ago period. The $0.76 in earnings per share reported far exceeded the consensus analyst expectation. The company also narrowed its guidance for full-year 2008 earnings per diluted share to $3.19 to $3.44, compared to the prior consensus estimate of $2.90 per share. Estimates for 2009 were subsequently boosted from $2.88 to $3.39.

Over the last 12 months, NCI has generated $114 million in free cash flow (measured as cash from operations less capital expenditures). At 14.6% of market capitalization, the free-cash-flow yield is enticing enough that I don’t really require any growth to justify an investment. I could even tolerate some declines in cash flow, particularly if they were of a temporary nature related to the economic cycle.

Analysts, however, expect the company to grow 13% annually over the next three to five years. I think that estimate is probably too high — at least without tapping external financing. The sustainable earnings growth rate based on ROE is closer to 11%. With a 1.3 price/book multiple (in line with the industry average) and a P/E of just 11.5, I think the valuation is more than reasonable.

I think the shares could trade to a free-cash-flow yield of 10%, which would ultimately justify a $58 share price (45% above the current level), based on the most recent year’s free cash flow. While this may take some time to play out, I think double-digit returns over the next three to five years are quite possible.

Disclosure: At the time of publication, William Trent has no financial position in the companies mentioned in this article. 

According to the Stock Blog post, “Stocks That Gain on Hurricanes” which company had “just announced” a share buyback?

Toro Company (TTC) -– “They have been hit because of the housing industry, but they have been growing huge overseas. They just announced a $4 million share buyback. They have gone up after every single hurricane. Besides, people need landscaping after a hurricane!”

In Fast Money’s Web Extra video “Najarian’s Sweet Trade” which home builder rated the opinion, “I’d stay away”?

Lennar (LEN)

In the models I follow, Lennar scores highly for free cash flow. However, it ranks among the worst in terms of earnings quality, price momentum, and return potential.

My latest column is up at RealMoney.

New orders for manufactured durable goods in May increased slightly to $213.6 billion, the U.S. Census Bureau announced last week. This was the first increase in three months, and it followed a 1.0% April decrease. Excluding transportation, new orders decreased 0.9%. Excluding defense, new orders decreased 0.6%.

Behind that bland summary, though, is usually a wealth of information that I believe could be useful for picking the best industries in which to invest. This month, the signal was clear. Get defensive. Among a sea of industries seeing declining sales and orders, one stood out for its strength: defense aircraft and parts.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

In his Friday “Game Plan,” Cramer said banks may bottom soon. But he warned of possible “catches,” including:

The catch here, and there always is a catch, is that if HOV and TOL report poor numbers and the U.S. has lost more jobs, Cramer’s predicting next week would be horrible for the financials. American International Group (AIG - Annual Report), Washington Mutual (WM) Wachovia (WB - Annual Report) and Bank of America (BAC) could sink to multiyear lows.

None of the stocks fare especially well in the models I use. HOV doesn’t even make it past the screens, and Toll Brothers scores among the worst for earnings momentum and return potential.

Bank of America scores poorly for earnings quality, earnings momentum and price momentum. The same applies for Wachovia, which also ranks low for free cash flow. Washington Mutual, by contrast, has a high free cash flow ranking but is also among the worst ranked for return potential.

AIG is the only name on the list that is not a net negative in my models. Its poor scores for earnings momentum and price momentum are offset by high marks for earnings quality and free cash flow.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

On Wednesday, Cramer revealed his Wind Index. Which “Windex” stock was NOT one of his previous calls?

But there are four other names, most likely new to Mad Money viewers, that Cramer’s using to round out the Windex.

Ameron (AMN) deals mainly in water pipeline systems but also has a wind-tower manufacturing business that could double in size this year.

The three other stocks all trade over the counter here in the States. Vestas

Vestas Wind Systems A/S VWDRY 43.2  UNCH  0%

OTC

Quote  |  Chart  |  News  |  Profile

 (VWDRY), the largest play on the global wind market, Cramer called it, that makes wind turbines and towers; Broadwind Energy (BWEN), a wind-farm construction and infrastructure play that also makes wind tower; and Clipper Wind Power (CRPWF), a turbine manufacturer based in the United Kingdom.

I have written about another Windex member, Thomas & Betts (TNB) here.

In “Emerging Money: Up For ‘08″ how many of Tim Seymour’s trades were part of the Emerging Money Top 20 list?

I still like *Cemex (CX), *Posco (PCX) and *Gazprom (OGZPF) , says Seymour, but with volatility at 6 month lows, I’d also be looking at put protection.

Also watch Mobile Telesystems (MBT) which has earnings coming out Tuesday.

*Indicates company is part of “Fast Money’s” Emerging Money Top 20, an index made up of 20 firms poised to profit from explosive global growth.

By my count, there are three *’s indicating index membership.

My latest column is up at RealMoney.

TTM Technologies (TTMI) manufactures printed circuit boards for the high-end commercial and aerospace/defense markets. The company focuses on a “quick-turn” model that can provide custom-fabricated PCBs to customers within as little as 24 hours. This strategy allows TTM to charge a premium for quick-turn services (which account for 15% of total revenue) and insulates TTM from the extreme cyclicality faced by most electronics manufacturing services (EMS) providers. In the last 10 years, the company reported just one year of net losses (2002).

TTM’s largest original equipment manufacturer customers in 2007 were Cisco (CSCO) , Honeywell (HON) , Juniper Networks (JNPR) , Northrop Grumman (NOC - Annual Report) and Raytheon (RTN) ; these OEMs accounted for a combined 24% of total sales. More than half of total sales were to EMS providers including my favorite, Celestica (CLS - Annual Report) , as well as Flextronics (FLEX) , Jabil (JBL) and Plexus (PLXS) . The diversity of customers and end markets should shield the company from short-term market share fluctuations among customers.

Here’s how the company fares in the Stock Market Beat models:

• Earnings momentum – positive
• Earnings quality – positive
• Price momentum – positive
• Free cash flow – positive
• Return potential – neutral

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

The geothermal industry is molten! But there are only 2 pure plays trading on U.S. exchanges. Name one.

Though there are just two pure-play choices trading on US exchanges – Ormat Technologies (ORA) and US Geothermal (HTM - Annual Report), there are a dozen combined in Canada, Australia, the UK and New Zealand.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

My latest column is up at RealMoney.

I dissect the jobs report to see which industries are showing the best/worst growth in new hiring, on the thesis that companies in these industries may present investment opportunities.

The fastest growing industries are restaurants, hospitals, mine services, machinery, and oil & gas extraction. The worst were transportation equipment and a plethora of housing-related sectors.

Disclosure: At time of publication, William Trent owns shares of Starbucks (SBUX).

Disclosure: Author is long Starbucks (SBUX) at time of publication.