There's a shortage of good cyclical stocks. I never thought I would write that but because we have had such a prolonged period of slow growth most of the cyclicals seem to have fallen by the wayside or merged.
Why do we think that Caterpillar (CAT) and United Rentals (URI) , which is on Mad Money tonight, are so strong?
Simple, we just don't have enough construction equipment companies to own. Sure we can buy Terex (TEX) but that's just too iffy a balance sheet. Plus it has a huge worldwide base and we really would prefer to buy American. We can buy Manitowoc (MTW) , a premier crane company, but that, too doesn't have all that much that is American and it is an American boom.
The old standbys, Illinois Tool Works (ITW) , Ingersoll Rand (IR) , Parker Hannifin (PH) , 3M (MMM) , Emerson (EMR) and Eaton (ETN) have run so much it is tough to touch them. But touch them you may have to. Don't forget Pentair (PNR) , a water cyclical split up or Fortive (FTV) , the spinoff from Danaher (DHR) .
There's Cummins (CMI) , the engine company, which subs for Caterpillar as an American/ Chinese hybrid. It's a good stand-in and I know it could go higher but it is subject to endless downgrading over month to month track sales. I hate that hedge fund game but it is a regular event with this one.
And of course there's United Techonologies (UTX) and Boeing (BA) , both of which won't quit. The have fabulous stories, as does Honeywell (HON) , a new addition to the recommended list of ActionAlertsPlus.com. Anything with aerospace just has a predilection to go higher.
All of these companies are consistent buyers, not issuers of stock. They husband it unlike the west coast tech culture of endless giveaways that make it so their supply is always bloated and against you.
It is so hard to find stock in any of these that it is amazing they all aren't higher. But then again, it is a little bit of a leap of faith to think that they are all going to blow away numbers. After listening to Mike Kneeland from United Rentals, though, I do think that upside surprises to await us.
Of course there are other ways to invest in the growth thesis. The papers, for example, but there, again, there used to be tons of them. No more. You buy International Paper (IP) . The chemicals of which there are a ton but the one that is top of mind is DowDupont (DWDP) . People love Westlake (WLKP) and LyondellBasell (LYB) . But, in many ways, that, too, feels like supply shortage, meaning a stock shortage, not a chemical shortage. Same goes for Weyerhaeuser (WY) a lonely lumber story.
Then, of course, you could go downscale and pick on Freeport McMoran FCX as a copper chit in the big scene. However, you have, again, to deal with China and I think that's not the cup of tea of this market. Oh and why not focus on the rails? Not CSX (CSX) , let it settle. But Norfolk Southern (NSC) ? Union Pacific UNP? I am fine with that.
Now of course I am generalizing. There are more industrials out there to pick up. Plus we know that you don't need to own all. You pick your faves but many of these stocks have leverage to every single initiative that Washington has given us including repatriation, quick write-offs of capital equipment and, of course, corporate tax reform.
What will they do with the money? Buy back stock? Bigger dividends? More hiring? More capital equipment? Does it matter? All are fabulous for shareholders.
But the best thing of all? We used to have hundreds of these kinds of companies. Now there are just dozens. And that, alone, assures you that they simply aren't done. They remain among the best places to be.
