Is 2021 the year industrial stocks will shine?
No matter how you perform on the stock market, the market pullback this week acts as a reality check. After such a downturn, it’s crucial that investors start to re-evaluate the rules of the game. This is to allow you to start laying the groundwork for your investing journey. One particular sector that stood out was industrial stocks.
Of course, industrialists took a hit when the US economy was slowed by COVID-19 amid ensuing shutdown orders to help curb the spread of the virus. Now, as global vaccines continue to roll out, the outlook for an economic recovery in 2021 is much more optimistic. That said, investors were on the lookout for the best industrial stocks to buy as the reallocation from tech to reopening sectors continues.
For investors worried about inflation issues, industrial stocks are one of your best assets in the stock market today. The industrial sector is strongly correlated with the performance of the economy. When the economy is growing, so are manufacturers. For example, Honeywell (NYSE:HON) and Carrier (NYSE:CARR) are good examples of industrial stocks that thrive during an economic recovery. So, if you expect industrial stocks to get a boost in 2021, now is probably the time to compile a list of top industrial stocks to watch.
Industrial stocks to watch on the stock market
OshKosh Corp
First off, at the top of the list, Oshkosh is the industrial stock to watch right now. The US Postal Service granted the company an initial $482 million on Tuesday to upgrade its fleet of postal delivery vehicles. The contract, which could be worth more than $6 billion in total, calls for the delivery of 50,000 to 165,000 next-generation delivery vehicles over 10 years. The deal will bring a mix of zero-emission battery electric vehicles (BEVs) and low-emission, fuel-efficient internal combustion engine vehicles.
“Our century-old history of delivering product 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 next-generation delivery vehicles. ‘USPS,“said John Bryant, executive vice president, Oshkosh Corp.
Oshkosh stock closed up 6.12% on the news. Of course, a big win for Oshkosh means a blow to recent investors in Workhorse Group (NASDAQ: WKHS). New USPS vehicles could begin deliveries in 2023. They will include vehicle safety technologies such as 360-degree cameras. The new vehicles will also have greater cargo capacity. After winning a major contract, would you consider adding OSK shares to your portfolio?
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Teradyne
Next, Teradyne is a company that produces automated test systems for semiconductors, wireless products, and electronic systems used around the world. You could say this is not an old fashioned industrial park. This is simply because the products it manufactures focus on high growth industries. By providing automated solutions across industries to improve productivity, efficiency and profitability will be a commodity that is expected to be highly sought after over the next decade.
In addition, the company counts ARK Invest among its shareholders. This is reason enough for some to buy TER shares. According to Teradyne’s fourth quarter results, revenue grew 16% year over year, ending a year with revenue growth of 36%. Despite reasonably good numbers, TER stock has been trading sideways since its earnings release.
In addition to automated solutions, Teradyne is also well positioned to capitalize on the growing market for semiconductor testing. It expects growth of 8% and 11% respectively in the SOC (System on a Chip) and memory segments. With the increasing complexity of smartphone chips, testing solutions will continue to be in demand. Given the long growth trail ahead, would you recover TER shares after the recent drop?
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General Electricity Company.
Next, General Electric is another industrial stock to watch. For starters, the multinational is an industrial juggernaut with over a century of experience. Today, General Electric mainly focuses on the areas of electricity, renewable energy, aviation and healthcare. Like most companies in the industry, General Electric has felt the pinch of the pandemic as the aviation industry has been essentially shut down. Despite this setback, her gigantic wallet has helped her through 2020 to some extent.
In summary, the company reported total revenue of $21.94 billion in its fourth fiscal quarter. On top of that, it ended the quarter with $22.81 billion in cash, a 57% year-over-year increase. Similarly, recent investor sentiment for GE shares also remains healthy, as it has risen more than 80% in the past six months.
In more recent news, General Electric has also been working hard to expand its renewable and industrial software businesses. Last week, the company’s renewables arm, GE Renewable Energy, revealed it would be involved in Europe’s largest onshore wind farm. 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 stocks to your watchlist?
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3M
Finally, 3M started the year in good shape, with all of its segments now generating some underlying growth. Additionally, analysts expect 3M to benefit from a recovering economy leading to 6% sales growth in 2021. According to its latest fourth quarter report, its earnings and sales exceeded the consensus estimate of 8.7% and 1.1% respectively.
On Feb. 23, the company also announced a multi-million dollar expansion of its relationship with Palantir Technologies Inc. (NYSE: PLTR). 3M will expand its use of Palantir’s Foundry platform in its digital transformation effort. The company will use the platform to support building a vibrant supply chain. After all, it is essential for a global manufacturer like 3M to be able to respond with agility to changes in demand for its products. With that, investors could look to further efficiencies in the future.
“Palantir played an important role in our Enterprise Operations digital migration strategy; we look forward to continuing to push the boundaries to ensure a continued focus on our customers,noted Shaun Braun, vice president of digital transformation at 3M.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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