After Last Week's Sell-Off, Manufacturing Stocks Are 'On Sale'

This week in manufacturing: Aug. 8-12

Much of the world will be closely watching the financial markets this week to see how they respond to the drama of the debt crises in Washington and Europe.

Even if the markets are unfazed by Standard & Poor's decision Friday to downgrade the U.S. credit rating one notch, there are plenty of other concerns weighing on investors' minds -- from the loss of confidence in our elected officials to the possibility of a financial-system meltdown in Europe.

For your companies' shareholders, and perhaps your own portfolios, it could be a bumpy ride.

It's not all bad news, though. For the casual investor, that means some fundamentally solid manufacturing firms will be available on the cheap, said investment manager Ben Dickey.

"I would tell everybody this is a Kmart 'blue-light special,'" Dickey said. "Stocks are on sale."

Dickey, who writes a monthly investment column for IndustryWeek.com, makes no bones about the fact that he sees manufacturing stalwarts such as Caterpillar, John Deere, Honeywell and United Technologies as buys right now, because they are poised to profit from the rise of the middle class in emerging markets such as China and India.

"Industrial manufacturing and commodities are the two areas right now that I think are going to be hot for quite some time," Dickey said.

After a tumultuous week on Wall Street -- the worst since the 2008 financial meltdown -- these companies became even more compelling buys for Dickey, who was a manufacturing engineering before becoming an investment manager.

When Dickey spoke with IndustryWeek Friday afternoon, he said he had upped his holdings in Joy Global and United Technologies earlier in the day.

Joy Global, which manufactures mining equipment that Dickey believes will help emerging economies quench their thirst for energy, started the week with a share price over $94. It closed the week at $79.56 per share.

Meanwhile, United Technologies' share price last week dropped nearly $10.

If you plan to hold a stock for at least one year, it's a buyer's market, says Dickey, who typically holds stocks for two to three years, sometimes longer.

Panic Is Not a Strategy

Like Dickey, the Motley Fool investment service extols the virtues of patient, long-term investing.

In an article posted Sunday, Morgan Housel asserted that another sell-off this week isn't necessarily a signal that the sky is falling.

"It could simply be the actions of short-term investors who are trying to get out first as they perceive that others will be panicky and gloomy," Housel wrote.

"This is why it's so important to ignore short-term market moves and focus on business values."

With a long-term perspective on investing, "a pullback is a buying opportunity to me," Dickey said.

Those looking for buying opportunity might not look any further than IndustryWeek's 50 Best Manufacturing Companies list for 2011.

Hard-drive maker Western Digital Corp., which is No. 1 on this year's IW 50 list, has seen its share price plunge from more than $37 to $30.54 over the past two weeks (as of Friday).

Consumer technology stalwart and Wall Street darling Apple, No. 2 on this year's IW 50, closed the week at $373.62, down from a peak of $400-plus the week before.

Beyond the IW 50, General Motors, which surpassed Toyota as the world's largest automaker in the first half of 2011, reported that its second-quarter net income rocketed up 89%.

Yet at the end of last week, GM was trading near a 52-week low ($26.31 per share).

For that matter, shares of rival Ford Motor Co. ended the week at $10.84 -- about 50 cents above its 52-week low.

Highlights for the Week of Aug. 8-12

Tuesday, Aug. 9

  • Federal Open Market Committee meeting
Wednesday, Aug. 10
  • Commerce Department monthly wholesale trade census for June (10 a.m. EDT)
Thursday, Aug. 11
  • Department of Labor unemployment insurance weekly claims report (8:30 a.m. EDT)
  • Bureau of Labor Statistics "Multifactor Productivity Trends in Manufacturing" report for 2009 (10 a.m. EDT)
Friday, Aug. 12
  • Thomson Reuters/University of Michigan survey of consumers, August preliminary data
  • Commerce Department retail sales census for July (8:30 a.m. EDT)
  • Commerce Department manufacturing and trade inventory report (10 a.m. EDT)
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