Electrical Equipment & Multi-Industry

Potential tax reform, regulatory relief and Infrastructure spending in a Trump administration could serve to break the negative feedback loop that Industrials and capital spending have been stuck for years. Instead, “animal spirits” could be sparked creating a positive feedback loop of investment and risk-taking.  Importantly, we have seen some upturn in activity even in the absence of policy changes reflecting a rebound from the 2015-2016 Industrial recession and better economic activity in Europe and China.  We are especially positive on discrete automation as a way to play re-investment back into the USA. While Industrials have had a powerful rally, we continue to have a positive bias on our group.

There are several common themes across our top picks. They have favorable short-cycle exposure (ROK, PH, HUBB) or infrastructure and construction exposure (JCI, IR). They are all well-positioned to capture incremental upside as markets turn positive due to previous restructuring actions and to drive organic growth on improving backlogs.  This group also has either good balance sheet capacity (ROK, IR, HUBB) or synergies (PH) from recent or pending deals to increase shareholder value.   

Top Picks:

  • Rockwell Automation Inc (ROK)
  • Parker Hannifin Corp (PH)
  • Dover Corp (DOV)