Previous posts have had much to say about “the industrials”. I like these companies and, on some days, I even love them. A few have just raised their dividends. The May 2011 issue of Smart Money magazine states on page 20 that “industrial firms have profit margins of 8.2% on average which is slightly higher than their five-year historical average” and that “Many have shed unprofitable subsidiaries and improved productivity at remaining ones.” (~Reshma Kapadia – Fattening Up Profits)
It can’t be a surprise to see the results of belt tightening and the implication of cleaning up your act. Betty (aka Mom) loved that phrase – “clean up your act!”. I’m never surprised when she is proven right.
The following companies are widely held and among the growing industrials. This is not a recommendation to buy. This list is to help readers understand the types of firms that comprise the sector.
General Electric (GE) – technology, service and finance company
United Technologies (UTX) – products and support to aerospace and building industries
Emerson Electric (EMR) – manufacturing and technology for a multitude of applications
Caterpillar (CAT) – construction and mining equipment
Union Pacific (UP) – railroad franchise
Honeywell (HON) – manufacturer of technologies; climate, defense, aerospace
Danaher (DHR) – business processes
3M (MMM) – products for healthcare, electronics, safety & security, transportation
Raytheon (RTN) – defense technology, homeland security and cybersecurity
Rising commodity prices can be viewed as a risk to the profits of industrial firms as they are not always able to pass these price increases on to consumers at same rate they must pay them. With that said, large firms such as these are often experts at hedging, insuring and preparing for these price fluctuations. I personally don’t see this as being a substantial problem for them in 2011.
To ascertain whether or not investing in industrial firms is appropriate for you, please schedule an appointment. Each individual’s personal risk tolerance, goals and current portfolio contribute to appropriateness.
Until next week,
“Susan On Money”