Is 2021 The Year For Industrial Stocks To Shine?
No matter how well you have done in the stock market, the pull-back in the market this week acts as a reality check. Following such a downturn, it’s crucial that investors should start re-assessing the playing field. That is to allow you to start laying the groundwork for your investing journey. One particular sector that stood out is industrial stocks.
Of course, industrials took a hit when the U.S. economy was idled by COVID-19 amid the shutdown orders that followed to help curb the spread of the virus. Now, with global vaccines continuing to roll out, the outlook for an economic recovery in 2021 is much more optimistic. That said, investors have been on the lookout for top industrial stocks to buy as the reallocation from tech to reopening sectors continues to take place.
For investors worried about inflation concerns, industrial stocks are one of your best plays in the stock market today. The industrial sector is strongly correlated with the economy’s performance. When the economy is growing, so are the industrials. For instance, Honeywell (NYSE: HON) and Carrier (NYSE: CARR) are good examples of industrial stocks thriving during an economic recovery. Hence, if you expect industrial stocks to receive a shot in the arm in 2021, then now probably is the time to be putting up a list of top industrial stocks to watch.
Industrial Stocks To Watch In The Stock Market
- OshKosh Corp (NYSE: OSK)
- Teradyne (NASDAQ: TER)
- General Electric (NYSE: GE)
- 3M (NYSE: MMM)
First, up the list, Oshkosh is the industrial stock to watch right now. The U.S. Postal Service on Tuesday awarded the company an initial $482 million to modernize its fleet of postal-delivery vehicles. The contract, which could be worth more than $6 billion in total, allows for the delivery of between 50,000 and 165,000 Next Generation Delivery Vehicles over 10 years. The deal will bring a mix of zero-emission battery electric vehicles (BEV) and fuel-efficient low-emission internal combustion engine vehicles.
“Our century-long history of delivering products to customers, operating in some of the most demanding and severe conditions on the planet, uniquely positions us to bring exceptional reliability, safety, and maintainability to USPS’s Next Generation Delivery Vehicles,” said John Bryant, executive vice president, Oshkosh Corp.
Oshkosh stock closed 6.12% higher on the news. Of course, a big win for Oshkosh means a huge blow for recent investors of Workhorse Group (NASDAQ: WKHS). The new USPS vehicles could begin deliveries in 2023. They will include vehicle safety technology such as 360-degree cameras. The new vehicles will also have a larger cargo capacity. After a major contract win, would you consider adding OSK stock to your portfolio?
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Coming up next, Teradyne is a company that produces automated test systems for semiconductors, wireless products, and electronic systems used globally. You could say it is not an old-fashioned industrial stock. That’s simply because the products it manufactures are focusing on high-growth industries. By providing automated solutions across industries to improve productivity, efficiency and cost-effectiveness will be a product expected to be highly sought after in the coming decade.
What’s more, the company counts ARK Invest as one of its shareholders. That’s a good enough reason for some to buy TER stock. From Teradyne’s fourth-quarter results, revenue came in 16% higher year over year, capping a year with 36% top-line growth. Despite the reasonably good numbers, TER stock has been trading sideways since reporting its results.
Apart from automated solutions, Teradyne is also well-positioned to capitalize on the burgeoning semiconductor test market. It expects 8% and 11% growth in the SOC (System on a Chip) and memory segments respectively. With the increasing complexity of smartphone chips, test solutions will continue to be in demand. Considering the long growth runway ahead, would you be picking up some TER stock after the recent dip?
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General Electric Co.
Next, General Electric is another industrial stock to watch. To begin with, the multinational company is a juggernaut in the industrial sector with over a century of experience. Today, General Electric mainly focuses on the fields of power, renewable energy, aviation, and healthcare. Like most companies in the sector, General Electric did feel the pinch of the pandemic as the aviation industry was essentially halted. Despite this setback, its mammoth portfolio helped it weather 2020 to a certain extent.
To summarize, the company reported total revenue of $21.94 billion in its fourth-quarter fiscal. On top of that, it ended the quarter with $22.81 billion in cash on hand, a 57% year-over-year increase. Similarly, recent investor sentiment for GE stock also remains healthy as it is up by over 80% in the past six months.
In more recent news, General Electric has also been hard at work expanding its renewable and industrial software businesses. Last week, the company’s renewable energy arm, GE Renewable Energy, revealed that it will be involved in the largest onshore wind farm in Europe. Meanwhile, its software arm, GE Digital, is now working with cloud-data analytics company Teradata (NYSE: TDC) to provide aviation-related solutions. With General Electric firing on all cylinders, will you be adding GE stock to your watchlist?
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Last but not least, 3M started the year in good shape with all its segments now generating some underlying growth. Moreover, analysts expect 3M to benefit from a recovery in the economy leading to 6% sales growth in 2021. From its latest fourth-quarter report, its earnings and sales surpassed the consensus estimate by 8.7% and 1.1% respectively.
On February 23, the company also announced a multi-million dollar expansion of its relationship with Palantir Technologies Inc. (NYSE: PLTR). 3M will be expanding its use of Palantir’s Foundry platform in its digital transformation effort. The company will use the platform to support the build-out of a dynamic supply chain. After all, it is essential for a global manufacturer like 3M to be able to respond to changes in demand across its products in a nimble fashion. With that, investors may be looking at further efficiency gains going forward.
“Palantir has played an important role for our Enterprise Operations digital migration strategy; we’re eager to keep pushing the boundaries to ensure a continued focus on our customers,” noted Shaun Braun, 3M’s VP of Digital Transformation.