"Vision is the art of seeing things invisible" Irish Satirist Jonathan Swift once wrote.
And right now, it takes a pretty serious artist to see their way through the haze and fog of the markets and auger the confidence to dive in or, if the case may be, to not bail out.
Even before markets stabilized this week, Portfolio Manager Ted Parrish of the Hennsler Financial Group was trying to see value when none was around and that led him to the Industrials. "These companies have very long type businesses that aren't really affected by short-term actions in the economy" Parrish says. "You've seen the rout in Industrials we've faced over past week-and-a-half. I don't think it's going to persist. When the comps come out with their guidance, Wall Street will see that the numbers are going to be pretty solid going forward."
And then Parrish gives this caveat to would-be bargain hunters: "I think you should nibble, not really double-down here. Things could get a little weaker. If you don't have an overweight position in Industrials right now I think you should probably take one."
He points to stocks like 3M (MMM) that had short-term double-digit losses. And Emerson Electric (EMR) too, which he said had a small revenue miss but overall great numbers and "is in a really good position in emerging markets for infrastructure build out in both China and India."
Parrish concedes that Industrials - even globally diversified ones -- aren't immune from reductions in government spending. As such, he says defense contractor Northrop Grumman (NOC) is "one position in the Industrial sector that's kind of in question right now from the portfolio committee. Even though he says Northrop is priced way below 10x earnings and looks cheap, he "needs a little more visibility to get more confidence."
As we segued into Tech stocks, Parrish countered Macke's push-back on Microsoft (MSFT) and Intel (INTC) with some push-back of his own. "They've both shown pretty resilient earnings growth over the past 3-5 years, and they both own their markets." He says Intel not only dominates AMD (AMD) but "finally paid a dividend so is now a mature growth and income company that is steadily building cash."
Parrish is "comfortable sitting back getting 3.5% from Intel while they dominate the market" adding that "at some point, they're gonna give it back to shareholders." He shares similar sentiment on Microsoft, and as much as he'd like to see a management shake-up or company break up to ignite the stock, Parrish again says he is comfortable waiting for Microsoft to "do something wth the cash on their books."
The other slice of his global industrial growth theme includes exposure to the Materials sector via a basket of stocks like the Materials SPDR etf (XLB), versus the individual commodities.
What about you? Would you get back into the market here, into Industrials, or do you want to see things stabilize more?
Your comments are welcomed below, as you your thoughts and ideas on Twitter @MattNesto
- Emerson Electric
- defense contractor
- Northrop Grumman