6 Stocks To Keep An Eye On: The Industrial Stocks Moving Mountains

A look at the giants whose technology and machinery are transforming industries

Market rotation refers to the shifting of investment capital from one sector of the economy to another based on changing economic conditions or investor sentiment. It's a strategy used by investors to anticipate and profit from these changes, moving funds to sectors expected to outperform next in the economic cycle.

Industrial stocks are closely tied to the health of the economy and can be strong performers during periods of economic growth and recovery. In market rotation, industrials fit in the mid-cycle expansion. During this phase, the economy grows at a steady pace, and industrial companies can continue to perform well, driven by ongoing demand for their products and services.

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Top 10 Holdings in the XLI

These top holdings in the XLI Select SPDR ETF reflect a broad range of industrial activities, from manufacturing and construction to transportation and aerospace.

1. Caterpillar Inc. (CAT)

2. GE Aerospace (GE)

3. Uber Technologies, Inc. (UBER)

4. Union Pacific Corporation (UNP)

5. RTX Corp (RTX)

6. Honeywell International Inc. (HON)

7. Eaton Corporation plc (ETN)

8. United Parcel Service, Inc. (UPS)

9. Deere & Company (DE)

10. Automatic Data Processing (ADP)

I own and trade some of these stocks, but not all. I track the markets and the 11 sectors of the S&P 500 daily. Most industrial stocks I buy and hold and add on stage 1s. As an investor and a trader, you should be tracking the 11 sectors and dive deep into the sub sectors and companies within them. It's a good idea to gain industrial exposure in your portfolio. Make sure to do your own research and follow the Money Flow rules.

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6 Industrial Stocks to Keep Your Eye On

1. Uber Technologies, Inc

Uber Technologies, Inc is fairly valued and has a fair value of $80 according to analyst Malik from Morningstar. UBER is known for its ride-hailing service, but also has significant investments in logistics and transportation technologies. UBER fits in both technology and industrials through its platform Uber Freight. The company's involvement in the movement of goods and people aligns with broader industrial activities, especially in the context of modern logistics, supply chain management, and the increasing importance of technology-driven solutions in these areas.

Uber Freight is a platform that enhances logistics and supply chain operations by integrating advanced technology, capacity, and expert partnership. It leverages AI to optimize network performance and streamline operations across various transportation modes and market conditions. Uber Freight focuses on creating efficiencies and facilitating seamless interactions among all stakeholders in the logistics industry, aiming to support businesses in running more intelligently and agilely.

2. United Parcel Service, Inc

United Parcel Service, Inc (UPS) is fairly valued and has a fair value of $158 according to analyst Matthew from Morningstar. UPS is a delivery services dividend payer and a global leader in logistics, offering a broad range of solutions including transporting packages and freight, facilitating international trade, and deploying advanced technology to manage the world of business more efficiently. Known for its brown delivery trucks and uniforms, UPS has a strong presence in the global supply chain and e-commerce fulfillment sectors.

UPS' massive package sortation footprint, immense air and delivery fleet, and worldwide operations tie together an extraordinary presence that's difficult to replicate. Along with superior parcel density, UPS uses many of the same assets to handle both express and ground shipments, impacting industry-leading operating margins. Investors might find UPS appealing for its extensive logistics network, robust e-commerce growth, and consistent dividend payments.

3. 3M Co (MMM)

3M Co (MMM) is fairly valued and has a fair value of $104 according to analyst Joshua from Morningstar. MMM is a top yielder on the Dogs of the Dow list and just released its new healthcare spin-off, Solventum (SOLV). MMM is a diversified global combination known for its wide range of products across various segments, including consumer goods, healthcare, and industrial products. Famous for innovations like Post-it Notes and Scotch tape, MMM has a strong focus on research and development, driving new product creation and sustainability.

MMM continues to emphasize innovation and keeps competitors away with generous levels of research and development spending, which usually adds up to 6% of net sales. The company continues to benefit from its shared technology platforms, which are applicable for multiple use cases and allows MMM to charge a 10-30% premium for its products while bringing down unit costs. Investing in MMM could appeal to investors looking for a stable company with a diversified product portfolio and a commitment to innovation.

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4. Delta Air Lines Inc (DAL)

Delta Air Lines Inc (DAL) is overly valued and has a fair value of $39 according to analyst Nicolas from Morningstar. As one of the major airlines in the United States, Delta is well-positioned to benefit from the rebound in travel post-pandemic. DAL is a considered a premium airline with the highest revenue and costs per seat mile in the North American Market. DAL's strategy of providing premium experiences to business travelers has resonated with customers and the company generally earns a unit revenue premium relative to peers.

DAL has the largest frequent-flyer program of the U.S. based network carriers and has a strong brand reputation, extensive network, and strategic alliances that enhance its global reach. Furthermore, DAL's focus on enhancing passenger experience and operational efficiency can support profitability. They focus on sustainability and fleet modernization, which could position it well for future industry challenges and opportunities.

5. Lockheed Martin Corp (LMT)

Lockheed Martin Corp (LMT) is undervalued and has a fair value of $482 according to analyst Nicolas from Morningstar. LMT is at the forefront of innovation in aerospace, defense, and security, which positions it well for future growth in areas like hypersonic technology, space exploration, and cyber defense. LMT heavily focuses on cutting-edge military hardware and advanced technologies and could be a strong addition to an investment portfolio looking for defense and technology exposure.

As a leading defense contractor, LMT benefits from stable and long-term government contracts, ensuring consistent revenue streams. LMT's prime contractor role on the F-35, the largest weapon program in history, should deliver stable revenue for decades through procurement and maintenance. Defense prime contractors operate in an acyclical business, which could offer some protection if the U.S ever enters a recession. LMT is also committed to dividend growth and share repurchases, which could provide steady returns in an investment portfolio.

6. Boeing Co (BA)

Boeing Co (BA) is fairly valued and has a fair value of $219 according to analyst Nicolas from Morningstar. BA is one of the largest aerospace and defense companies globally and has a diversified business model including commercial airplanes, defense equipment, and space technology. This diversification helps mitigate sector-specific risks. BA has a large backlog that covers several years of production for the most popular aircraft which puts them at the forefront of demand for aerospace products.

BA is also pivotal in the aviation industry's recovery post-pandemic, with increasing demand for air travel potentially boosting aircraft sales. The company's ongoing efforts to resolve its challenges, like the 737 MAX, and its investments in future technologies, including sustainable aviation fuels and space exploration, highlight its commitment to long-term growth. BA is is well positioned to benefit from emerging-markets growth in revenue passenger kilometers and a robust developed-market replacement cycle over the next two decades.

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Final Thoughts

As the industrial sector continues to evolve, keeping an eye on influential stocks such as those highlighted can offer investors strategic opportunities for growth and diversification. From aerospace giants like Boeing (BA) to defense leaders such as Lockheed Martin (LMT), these companies not only represent strong historical performances, but also future potential amid global economic developments and technological advancements.

Investing in these stocks could provide a strong foundation for those looking to harness the dynamics of industrials, making them essential considerations for any investment portfolio focused on long-term resilience and innovation. Like I mentioned earlier, I owe some of these stocks, but not all. Make sure to always do your research and follow the Money Flow rules.

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FINANCIAL DISCLAIMER

This is not financial advice, but education to increase awareness. Before making investment decisions, always do thorough research and possibly consult with a financial advisor. The above descriptions are a broad overview and may not capture all nuances associated with each asset.