Most people can't stand getting out of their comfort zone and doing things unfamiliar or different from their routine. I'm no different. When it comes to writing about stocks, I'm most comfortable discussing consumer goods companies like Nike (NYSE: NKE), Procter & Gamble (NYSE: PG) and Coca-Cola (NYSE: KO). However, if we want to become better investors, sometimes we need to step off the curb and explore the unknown. Today, I'll do that by recommending four stocks from the industrial goods sector. A mechanic, I'm not.

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United Capital Corp.
(NYSE: AFP)
Still a little nervous about stepping into the unknown, I'll reach for the somewhat familiar. United Capital is a holding company consisting of three business segments: engineered products, real estate and hotels. Together, they produced $27.4 million in revenue and $2.9 million in operating income for the first six months of the year ended June 30. The engineered products division accounts for 39.7% of its revenue but very little of its operating income. That's left to the real estate holdings, which generate almost 100% of its profits. Sitting with $17.50 in cash and marketable securities per share, at current prices, you're paying $3.30 or 2.1 times earnings per share for a 10-year historical average of $1.57. If you can stand the peaks and valleys, its stocks appreciated 1500% over the last 19 years compared to 245.76% for the S&P 500.

Comfort Systems USA (NYSE: FIX)
Guru investor John Reese believes that this small cap, Houston-based heating and cooling repair contractor, with 85 locations across the country, is the 35th best company in the markets right now. Using Joel Greenblatt's two-pronged evaluation system: return on invested capital (ROIC) and earnings yield, you'll see that Comfort Systems has an ROIC of 35.6% and an earnings yield of 21.0%. That's impressive. What really stands out for me is its free cash flow, which sits at $64.8 million for the trailing 12 months, yielding 15.5%. Anything over 10 is excellent. According to Goldman Sachs analyst Joe Ritchie, the company's reliance on commercial and industrial customers will hurt it as the current non-residential construction slowdown continues into 2010. He rates it a "sell" and puts a price target of $9 on its stock. Let's say earnings do drop to 85 cents a share this year and the stock hits his price projection. You're still looking at a 9.4% yield, which isn't too shabby, and once the economy picks up the company will do fine. In the meantime, it will continue its role as industry consolidator and build market share.

Black & Decker (NYSE: BDK)
Okay, we're back in comfort territory. I've actually heard of this brand. What some of you might not know is that Black & Decker also owns Dewalt, one of the most popular brands of power tools on construction sites. Originally acquired in 1960 for its radial arm saws, it jumped into the industrial power tools market in 1992, figuring the Dewalt name would resonate more with its end users than Black & Decker. That was a great call. Even I know the Dewalt brand, and I'm hopeless with power tools. While sales in the last two years have softened, its third-quarter report promises good things are on the way. Although the Q3 saw revenues drop 21% to $1.21 billion from $1.57 billion year-over-year and net income dropped 35% from $85.8 million to $55.4 million, its Q4 guidance was strong. Management expects earnings per share in the Q4 between 68 and 78 cents, much higher than analysts' expectations of 50 cents. Full-year, it should earn at least $2.45 a share. It's still way off the $7.75 a share it earned in 2007, but it's a start.

Waste Management (NYSE: WM)
Wayne Huizenga started this now-giant garbage collection business in 1962 with one truck and built it into a waste empire, leaving in 1984 to look for new opportunities. Once a company of questionable business tactics, it's now a very successful operation. In 2008, its operations generated revenues of $13.4 billion and net income of $1.08 billion. In 1991, long after Huizenga left, revenues were just $270 million and operating with a $22 million loss. Therefore, it's questionable how much credit is due Huizenga for today's excellent state of affairs. Instead, much of the credit should go to management for doing a good job of allocating capital in an incredibly capital-intensive business. In the latest trailing 12-month period, it managed to generate $1.2 billion in free cash flow, yielding 6.1% against a market cap of $19.6 billion. That's a solid return in a very competitive industry. I'll take it.

Bottom Line
Franklin D. Roosevelt once said, "All we have to fear is fear itself." All four stocks I've recommended - despite my initial concerns about industrial goods companies - are actually quite easy to understand and not worth fearing. Each does a good job at what it knows best. Whether it's HVAC, power tools or garbage collection, the more focused a business is, often the more profitable it is as well. By facing our fears and moving outside our comfort zones, we stand a better chance of investing success. (For more, see our Investopedia Special Feature: Investing 101.)

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Tickers in this Article: AFP, FIX, BDK, WM, NKE, PG, KO

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