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Ride the Momentum in Industrial Sector With These 4 Stocks

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The latest Institute of Supply Management (ISM) data reports that the manufacturing index climbed to 60.8% in September from 58.8% in August, scaling the highest since May 2004. Also, Gross Domestic Product (GDP) of the United States grew at an annualized rate of 3.1% in second-quarter 2017, the strongest growth registered since first-quarter 2015.

Industrial stocks have been in investors’ good graces, of late, driven by impressive factors such as increased demand for rebuilding supplies (thanks to two major hurricanes), growth in new orders, rise in export and upbeat job market picture, as well as recovery of the Chinese economic conditions.

Banking on such bullish trends, investing in stocks from the industrial sector might prove beneficial now.

We note that the Industrial Products sector is currently placed at the top 31% out of the 16 Zacks Sectors. This sector has also been outperforming the S&P 500 market in recent times. In three months’ time, the sector has recorded around 5.2% growth, well above the S&P 500 index’s growth of 3.9%



Per the Earnings Outlook report dated Oct 11, the Industrial Products sector (accounting for 2.2% of the S&P 500 index’s total market capitalization) is likely to record 2.8% growth in revenues and 9% upside in earnings in the Q3 earnings season.

What’s the Rewarding Strategy?  

We believe investors can earn handsome profits by extrapolating the current bullish trends of the market into the future. Henceforth, seeking refuge in momentum investment strategy is a strategic investment gamble at this moment.

However, picking the right momentum stocks may baffle even seasoned investors, let alone the new ones, who are planning to enter the uncharted world of jam-packed trades.

Here, at Zacks, we use our Style Score System to single out the stocks which can aid you in beating the market.

The Zacks Momentum Style Score indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success.

Our Picks

Four hot industrial stocks discussed below seem to be promising investment bets at the moment. These stocks currently carry a Zacks Rank #2 (Buy) and have Momentum Scores of A or B. Notably, these picks enjoy bright prospects and are also currently performing better than the broader market.

Altra Industrial Motion Corp. (AIMC - Free Report) manufactures, designs and markets premium mechanical power transmission components globally. The company has a Momentum Score A. The stock’s projected sales growth for 2017 is 21.8%, higher than 2.6% gain estimated for the industry. It promises returns of 16.5% on equity and 8.6% on capital. Over the last 90 days, the Zacks Consensus Estimate for the stock moved north 5.7% for 2017. Notably, the company’s EPS is projected to grow nearly 8% in the next three to five years.

Over the last six months, the company’s shares yielded a return of 26.9%, outperforming 14.5% growth recorded by the sector.



You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

A. O. Smith Corporation (AOS - Free Report) produces and markets commercial and residential gas, electrical water heaters, gas tankless, various water treatment products in India, Europe, China, and North America. The company has a Momentum Score A. The stock’s projected sales growth for 2017 is 11%, higher than 4.2% gain estimated for the industry. It promises returns of 22.2% on equity and 18.2% on capital. In the past 90 days, the Zacks Consensus Estimate for the stock inched up 0.5% for 2017. Notably, the company’s EPS is projected to grow nearly 13.9% in the next three to five years.

The company’s shares yielded a return of 22.4%, outperforming 14.5% growth registered by the sector, in six months’ time.



Xylem Inc. (XYL - Free Report) offers state-of-the-art engineered solutions for the wastewater and water applications. The company has a Momentum Score B. The stock’s projected sales growth for 2017 is 24%, higher than 2.6% gain estimated for the industry. It promises returns of 17.3% on equity and 9.4% on capital. The Zacks Consensus Estimate for the stock moved 2.6% upward for the current year, in the last three months. Notably, the company’s EPS is projected to grow nearly 15% in the next three to five years.

In the past six months, the company’s shares yielded a return of 31.6%, outperforming 14.5% growth recorded by the sector.



Illinois Tool Works Inc. (ITW - Free Report) produces and markets industrial equipment and products across the globe. The company has a Momentum Score B. The stock’s projected sales growth for 2017 is 4%, higher than 2.6% gain estimated for the industry. It promises returns of 46.6% on equity and 18.4% on capital. Over the last 90 days, the Zacks Consensus Estimate for the stock moved 1.9% north for 2017. Notably, the company’s EPS is projected to grow nearly 9% in the next three to five years.

Over the last six months, the company’s shares yielded a return of 16.3%, outperforming 14.5% growth registered by the sector.



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