If the industrial sector is your preferred choice for investments this year, knowing the trends within the sector will go some way to helping make better choices. After a year where uncertainty and unprecedented circumstances have disrupted the usual trends, making it even more difficult to predict where future growth lies, 2021 should hopefully provide a clearer outlook. If investing in industrials this year, you’ll want to gain as much valuable human insight as possible. Here are some of the trends to keep an eye on.
With COVID-19, the industrials sector saw reduced demand for goods and services. During difficult times such as a pandemic, this sector can be particularly sensitive as it is a key part of the economy. With dwindling demand for these types of goods and services, this affects stock prices and profitability. With 2021 seeing light at the end of the tunnel for the pandemic, positivity around the sector bouncing back is high. With more demand, this could be a good time to invest in the sector, especially with companies that have diversified during the last 12 months and are in a better position to grow again quickly.
As the sector covers aerospace and air freight stocks, along with transportation in general, this was particularly hard hit by the pandemic. With a continuing successful vaccination programme being rolled out, this has lifted positivity in these sub-sectors that worldwide travel will resume possibly before the end of the year. Companies like Lockheed Martin Corp. (LMT) and United Airlines Holding Inc. (UAL) are well-known choices, but there are some such as Air Lease Corp. (AL) that currently have a low price-to-earnings ratio for the last 12 months. The company buys, sells, and leases commercial aircraft and could prove to be good value for investment this year. The same can be said for Huntington Ingalls Industries Inc. (HII), who are a shipbuilding company for the US Navy and Coast Guard. They have also seen a low P/E ratio that could represent good value for investors.
Waste Disposal & Recycling
There is always a need for high-quality waste disposal and recycling services, representing a huge sub-sector. During difficult economic circumstances, essential services like this faired better than most. One of the leading companies in this sub-sector, Waste Management (WM), provides waste disposal, recycling, and resource recovery to both residential and commercial customers. Investment within this sub-sector could prove savvy as many companies have survived the worse of the last 12 months. Waste Management in particular reduced costs that helped when demand slightly declined and made investments into more environmentally friendly vehicles, seeing their stock soar by 16.3% in March.
As industrial sector companies are linked closely to the economy, any period of economic shock can make investment during this period risky. Keeping an eye on the trends will ensure that investors this year will choose the right moment to make their move and see a healthy return in the coming months and years.