Electrical Equipment & Multi-Industry

We are encouraged by some early signs that COVID infections maybe be leveling off in Europe and the U.S., although it’s too soon to know for sure. The good news is the lockdowns seem to be “flattening the curve”; the bad news is the longer we stay locked down the worse commerce is disrupted. When social distancing ends and stay at home orders are lifted, we are likely to find that demand has been broadly damaged. The hit already to personal and business balance sheets and cash flow has been severe. The second derivative effects of CapX cuts in Aero, Energy and Automotive industries will ripple through all industrial end markets. Fortunately, many companies do appear to be making valiant efforts to stay open and many are opting for temporary furloughs and pay cuts to mitigate some of the damage to the workforce. However, this may be delaying the inevitable unless end demand snaps back quickly. Weak demand would lead to slack capacity which in turn would limit the need for capital spending. As asset utilization drops, high margined MRO activity is likely to fall.

Top Picks:

  • Dover Corp (DOV)
  • Johnson Controls, Inc. (JCI)
  • Stanley Black & Decker, Inc. (SWK)
  • ITT Corp (ITT)

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