Real economic recovery starts in the manufacturing sector. And that’s largely why manufacturing stocks belong in your portfolio. That concept for the markets goes all the way back to Charles Dow, namesake of the Dow Jones Industrial Average.
When consumers and businesses start to buy, to grow their businesses or spend their rising wages, it’s the manufacturing sector that helps make it happen. New construction equipment, new infrastructure and all the pieces that move growth forward start to ramp up.
Federal Reserve Chairman Jerome Powell recently announced that he forecasts faster than expected economic growth and interest rates that will remain near zero. That’s the ideal combination for stocks.
The seven manufacturing stocks below are your portfolio’s infrastructure picks and many have been around since Charles Dow was working on Wall Street. They will continue to deliver through this economic upswing and beyond. They’re all strong companies that are very experienced navigating economic cycles. And many are building the next generation of equipment for a greener world:
- ABB (NYSE:ABB)
- AGCO Corp (NYSE:AGCO)
- Caterpillar (NYSE:CAT)
- Cummins (NYSE:CMI)
- Emerson Electric (NYSE:EMR)
- Ingersoll Rand (NYSE:IR)
- Oshkosh (NYSE:OSK)
Manufacturing Stocks: ABB (ABB)
Launched in 1988, this Swiss company is a global leader in infrastructure project development as well as industrial design.
While it has a $62 billion market cap, it’s not a flashy company. It has a great reputation in its disciplines, but isn’t too interested in getting in the limelight. It’s far more steak than sizzle.
Today, manufacturing stocks aren’t just building electrical grids and state of the art equipment to power them. They’re also building out robotics and developing next-level industrial automation.
Given all the facets of ABB’s work, it’s also a significant player in the growing ESG (environmental, social and corporate governance) investing trend. And it will be a leader in this sector as long as it exists.
ABB stock is up 112% in the last 12 months, yet its current P/E is a mere 12x and it still delivers a rock-solid 2.2% dividend.
AGCO Corp (AGCO)
Here’s another company where the name might not mean much, but its brands are known the world over.
Launched in 1990, AGCO has bought up many of the smaller agricultural equipment makers in the U.S. and around the world since then. Some it has turned into AGCO name brands and others it has left under their original names, like Massey Ferguson.
At a mere $10 billion market cap, this isn’t one of the giants in the sector. But it does have a number of beloved brands as well as its own lines of equipment that have their loyal followers. Remember, farm equipment is a big, long-term investment. You don’t swap it out every couple of years. It also has its own financing arm, which is another source of revenue for the company.
This is a truly global manufacturing stock, having purchased agricultural companies from around the world, including leading brands in India, China and Europe. AGCO stock is up 260% in the past 12 months yet it’s still trading at a relatively low current P/E of 25x. There’s plenty left to harvest here.
This is the bellwether of all manufacturing stocks. If it’s doing well, you know the global economy is doing well. Even with an influx of new competitors in its heavy equipment market from Japan and China, CAT still remains top dog.
The past few years the stock has been coasting along, in a pretty unspectacular trading range, but after the pandemic hit and the recovery began as nations began to dump economic stimulus money into their economies, CAT took off.
CAT is now working on self-driving heavy equipment and electric-powered vehicles, which has helped its ESG profile. It’s even developing mining and industrial equipment for the moon!
CAT stock is up 145% in the past 12 months, which is a significant move for company with a $123 billion market cap. It still has a decent 1.8% dividend as well.
Most people recognize CMI for its diesel engines on big pick-up trucks. But CMI has been building heavy-duty engines since 1919. And it continues to stick to its knitting, making quality engines for commercial and consumer equipment manufacturers.
It has also made significant inroads into natural gas and electric engines in recent years. But that isn’t too surprising, since it was a diesel pioneer when those engines revolutionized reliability and power for heavy equipment. Its foray into next-generation power also has big benefits for its ESG profile and thus, institutional investors.
This is one of those manufacturing stocks you can buy and hand over to your grandchildren. It’s not a sexy company, but it has guile to survive for over 100 years in a volatile sector and it provides a reliable 2% dividend even after the stock has soared 127% in the past year.
Emerson Electric (EMR)
In 1892, EMR was the first company to sell electric fans in the U.S. using alternating current. It was the leading airplane armament manufacturer during WWII. The point is, EMR has learned to adapt to the circumstances it has been given.
That’s how it’s survived the Great Depression, two World Wars and everything else that has happened in the past 131 years since its founding.
Today it makes electric motors as well as equipment for manufacturing all sorts of electric and conventional engines and equipment. It has a variety of equipment for making compressed natural gas engines used in busses and trucks, as well as hydrogen and electric vehicles. It’s not a flashy newcomer to the ESG movement, but it’s a well-seasoned, solid player all the same.
EMR stock is up 133% in the past 12 months, but shares still have a decent 2.2% dividend. EMR isn’t a sexy newcomer to the Green Revolution, but it will deliver long after many are faded memories.
Ingersoll Rand (IGR)
The one thing that’s absolutely necessary about an industrial revolution — as well as evolution — is the need for parts. New parts, spare parts and improved parts. That’s what IGR has been supplying since 1872.
It should be no surprise that many of the manufacturing stocks in this article are companies that go back to the turn of the 20th century. They’re here because in the past year, many of new, sexy tech stocks have stolen the headlines. Yet these legacy innovators continue to form the backbone of the global industrial economy.
And they will continue to do so. IGR stock is up nearly 100% in the past 12 months as institutional investors and savvy market pros have moved in for the long haul.
No, this isn’t the Oshkosh that makes the beloved children’s clothing. This is the one that just won a potential multi-billion-dollar deal to build the next-generation electric vehicle fleet for the U.S. Postal Service.
OSK currently builds some of the major commercial and industrial equipment brands in the game — Jerr-Dan tow trucks, Pierce fire trucks, London concrete mixers as well as Oshkosh defense and rescue vehicles, among others.
During the various conflicts in the Middle East, OSK became a major player in mid- and heavy-duty MRAP (mine resistant ambush protected) vehicles. And of course, like others in this group, it has been around since 1917. And it has remained a key manufacturing stock for the armed services.
There’s some controversy over the massive USPS deal it won. But even if they allow another manufacturer in on the contract, it’s not going to hurt OSK. That’s especially true since it has an initial delivery deal with the potential for a longer-term contract. It’s likely a couple other players will come along at some point. But the rest of its product line should fare well in an improving economy with lots of stimulus money.
OSK stock is up 141% in the past 12 months, yet it’s trading at a current P/E of 26x, with a 1.1% dividend.
On the date of publication, Louis Navellier has positions in ABB, AGCO, CAT, CMI and EMR in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
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