When it comes to bellwether stocks, investors key on earnings reports from the usual suspects, mostly big blue chips that offer some insight into broader industries or the global economy.
For example, aluminum giant Alcoa‘s (NYSE:AA) results are parsed for macroeconomic clues because its products are a basic building block in everything from manufacturing to construction to cars. Cisco Systems (NASDAQ:CSCO) makes the routers and switches that form the backbone of our digitally connected world. CSX (NYSE:CSX), the railroad giant, is something of a proxy for economic activity, since much of the nation’s goods and energy are still shipped by rail.
But a bunch of lesser-known bellwethers also serve as barometers for their respective industry or bigger economic trends that often go overlooked during earnings season. Here’s a glance at five under-the-radar bellwethers and what their results might reveal about the bigger picture:
Grainger (NYSE:GWW) sells a broad portfolio of goods to a range of businesses. From pumps and power tools to padlocks and plumbing supplies, the company is a good proxy for industrial activity and investment. That makes Grainger’s most recent results fairly reassuring. Revenue for the quarter grew 16%, helped by higher volumes and better pricing. In the U.S., sales increased 11% in January and 12% in February before cooling off a bit to a 9% gain in March.
You have Molex (NASDAQ:MOLX) products in many of your consumer gadgets — and you probably don’t even know it. The company makes electronic components like connectors, card sockets, antennas, jacks, switches — all the little boring bits found in every electronic device on the planet. True, revenue slipped for the most recent quarter, but business conditions also stabilized, the company said. “The long term themes driving the business — mobility, IT spending and growth in emerging markets –continue to develop,” CEO Martin Slark said in a statement.
The agriculture and commodities sector is looking brighter heading into the summer, at least according to fertilizer company Mosaic‘s (NYSE:MOS) most recent report. Fertilizer prices plunged during the third quarter of 2011, but the potash and phosphate maker says conditions have since improved sharply. Global demand for fertilizer is back, boding well for the broader industry. “We anticipate another year of high farm income in North America — the second-highest on record — and strong farm economics around the world,” CEO Jim Prokopanko said in a statement.
LVMH Moet Hennessy Louis Vuitton
When wealthy people stop shelling out for luxury goods, you know the market is in the toilet and the global economy is in trouble. High-end manufacturers and retailers led the sector out of the recession following the dot-com bust, struggled during the nadir of the financial crisis and have since bounced back with the three-year bull market. So it’s something of a relief that luxury behemoth LVMH (PINK:LVMHF) recently posted a 25% jump in revenue, helped by rapid growth in Asia and the U.S. The company also said it saw “good progress in Europe,” despite the uncertain economic environment.
When Avon (NYSE:AVP) reports results May 1, much of the focus will be on the string of high-level executive departures amid a bribery scandal, as well as the company’s rejection of an unsolicited $10 billion cash offer from Coty. But for bellwether watchers, all eyes should be on the company’s figures on active representatives. Avon, you see, is almost a countercyclical stock. As a door-to-door seller of bath and beauty products, it depends on reps (formerly known as Avon Ladies) to move its goods. When times are tough and unemployment is high, more people join Avon to make ends meet. A decline in Avon’s level of active reps is generally good news for the rest of us, because it means the jobs picture is probably improving.