Electrical Equipment & Multi-Industry

While there will be a different complexion of recovery by vertical market, we are still of the view that the general shape of industrial activity/capital spending will resemble the shape of a reverse square root symbol. In essence, we had a sharp “V” down in the spring and then a sharp but smaller “V” off the unsustainable lockdown lows. We see the pattern clearly forming in the global GDP outlook from the OECD and in many data sets we track regularly such as U.S. Industrial Production, Vehicle sales, the ABI, Global RPK’s and WTI oil prices. While we don’t know what the future holds, we believe we are moving in to a new phase of learning how to live and work with COVID (hopefully not indefinitely). While we’ve been living with it since the beginning, our point is the Q2 plunge was clearly not normal, but therefore neither was the Q3 bounce. From here we likely see the bounce begin to lose momentum and expect activity will begin to flatten out into a slower grinding recovery as the gravity of weak employment, demand destruction and excess industrial capacity exerts its pull. Times are challenging and unprecedented, but most companies are doing an admirable job rising to the challenge. We saw decisive defensive moves to contain costs in Q2. The outlook is uncertain in many markets and companies are still being cautious on costs, but managements are also now beginning to pivot and want to have the offense on the field to capture pockets of recovery and drive the business organically and inorganically. The growth outlook for 2021 is uncertain to say the least, but on the comps alone most companies should have top line growth in 2021.

Top Picks:

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


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