7 American Manufacturing Stocks to Buy Before Recovery

The Institute for Supply Management supplies a monthly look at the U.S. manufacturing market. In April, that index hit an 11-year low.

But since then, the numbers have been rising. They’re not going wild, but they’re rising.

You have seen this in the housing market where new home purchases are growing — mortgage demand is increasing — and in other spots that show the consumer moving back into the economy and taking advantage of low interest rates.

This is why the consumer is so fundamental to the economy. When they are buying durable goods and housing, manufacturers benefit from the increased demand.

These 7 American manufacturing stocks to buy now are benefiting from the expanding consumer demand for goods.

And they should benefit further as the U.S. economy rights itself and starts to grow again.

  • Builders FirstSource (NASDAQ:BLDR)
  • AAON Inc (NASDAQ:AAON)
  • Generac Holdings (NASDAQ:GNRC)
  • Applied Materials (NASDAQ:AMAT)
  • YETI Holdings (NYSE:YETI)
  • Illinois Tool Works (NYSE:ITW)
  • Lumentum Holdings (NASDAQ:LITE)

Remember many of these stocks were hammered over the spring when investors were still expecting the worst from the COVID-19 lockdowns. And right now, all of them are a “Buy” in the Portfolio Grader tool I use to find Growth Investor plays.

Builders FirstSource (BLDR)

This likely isn’t a name consumers know offhand, since it’s fundamentally a supplier to the homebuilding market, supplying goods such as roof and floor trusses, vinyl windows, drywall and lumber.

But it is a Fortune 500 company and does about $7 billion worth of business across more than 400 locations around the US.

Again, you’re not going to see a lot of advertising on television for BLDR, but it is a major homebuilding supplier in the U.S. That means when housing is growing, so is BLDR.

The stock has been on a ride in the past year, growing well through the second half of 2019, only to erase much of those gains in March this year. But BLDR is up 80% in the past 3 months and still up 22% in the past 12 months.

AAON Inc (AAON)

This firm specializes in commercial, industrial and residential HVAC. This is another sector that goes hand in hand with an expanding economy. New facilities need new equipment.

Also, with low-cost loans available, upgrading old, inefficient equipment for more efficient HVAC can actually be cost-reducing in the long term. That also goes along with businesses that are expanding or downsizing their plants and offices.

Remember, the locksdowns have sent many people home to work, which is also an ideal time to do the necessary upgrades to HVAC units. Work-from-home, to a much greater extent than it was pre-pandemic, is here to stay, and that’s been a source of great buys for Growth Investor.

AAON stock has stayed positive throughout the COVID-19 troubles and currently is up 10% year to date. It also offers a small 0.7% dividend, which is still better than a lot of CDs out there.

Generac Holdings (GNRC)

As our world becomes more gadget-centered — TVs, computers, smartphones, etcetera — it also needs reliable sources of power to supply these devices and the equipment and devices that run them.

Given that our power grid hasn’t changed much from the grid that Thomas Edison helped develop, demand is beginning to outstrip supply increasingly often. And as we recently saw in California, harsh weather combined with stresses on this antiquated system can turn catastrophic.

Many people are coming to realize that having back-up power when their utility goes down is a smart play. And that bodes well for leaders in the field such as Generac.

The stock has taken off in the past few years as consumers and industrial clients see the need and value in being able to manage ‘off the grid’. And it’s also easier and more convenient than ever before to integrate backup power into your business set-up.

GNRC is up 70% over the past year, 21% year to date. This is a long-term trend beyond the traditional business cycle.

Applied Materials (AMAT)

Usually when you think manufacturing, you think big machines, sparks and hard hats.

Well at AMAT, it’s more about lab coats and sterile rooms.

Since 1967, AMAT has been a leading manufacturer of semiconductor equipment. They build the machines that etch, measure, inspect and conduct all other aspects of wafer production.

Most tech investors think of chipmakers as the superstars of the industry, but it’s behind the scenes players like AMAT that keep their stars burning. And being a key supplier for more than half a century in such a dynamic industry shows you that they’re every bit as cutting edge as they used to be. That’s a recipe for strong fundamentals and popularity with the “smart money” on Wall Street, which is where I find compelling opportunities for Growth Investor.

Tech remains a cyclical industry. And right now, tech is hot. The S&P 500 has even adjusted its weighting to favor tech stocks. That’s great news for AMAT.

The stock is up 35% in the past 12 months, and still delivers a respectable 1.5% dividend.

YETI Holdings (YETI)

If the pandemic lockdown did one thing beyond flattening the curve, it was to drive cabin fever to a pitch like nothing has in recent memory.

People were itching to get out of the house. And many, respecting the need for social distancing, didn’t head to the cities, but instead to mountains and lakes and beaches.

And the fact that they may have given up summer holidays or had fewer options to spend money, saw YETI as a great place to pick up on some premium outdoor recreation products.

YETI is known for its top of the line coolers, drinkware and just about anything else outdoor gear oriented. It has also become somewhat of a status symbol brand among those in the know, which is a big deal for consumers with disposable income.

The stock has been on a tear, up 136% in the past 3 months and 41% in the past year. This is the most directly consumer-driven stock of the bunch.

Illinois Tool Works (ITW)

This firm has been around since 1912 — that’s the year Woodrow Wilson beat William Taft for the presidency.

That’s a long time to be making tools. At this point, the company carries a $55 billion market cap and is diversified across a number of industries, including electronics, automotive, food, polymers and welding.

That kind of diversification is what has helped keep this giant so successful for so long. ITW isn’t a sexy company by any means, but what it lacks in sizzle it makes up for in steak.

The stock delivers a solid 2.4% dividend and has a proven record of weathering even the most catastrophic storms. Currently, it’s up 17% for the past 12 months and 27% in the past 3 months.

This is a safe port-in-the-storm stock that continues to perform quietly and consistently.

Lumentum Holdings (LITE)

One of the most fundamental advances in our digital world was discovering how to use light to transfer data. Photo optics had a huge beginning in the 1990s when it was still fairly theoretical and didn’t have enough demand to support the expense.

The sector had its reckoning when the dotcom bubble burst. But since then, it has continued to grow and mature.

Now fiber optics are at the core of most high-power commercial and consumer telecom systems.

LITE is a core provider of optical and photonics products. That means it provides the components and subsystems that move data around the country (and world) as well as building commercial grade lasers that are helping industries as diverse as sheet metal processing, precision machining, biotech and drilling circuit boards.

The company started just 5 years ago and already has a $6 billion market cap — that’s some serious growth. In the past 12 months, LITE is up 50%, 18% in the past 3 months. This growth stock will keep its momentum through our current events.

— Louis Navellier

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Source: Investor Place