The manufacturing renaissance here in the U.S. is on! Today's Markit flash PMI ticked higher to 57.5 in June from 56.4 in May. While not the be all end all of economic data it shows that, at the very least, manufacturing is headed in the right direction.
It's a theme Brian Belski of BMO Capital Markets agrees with regardless of the specific numbers. "The last ten years has been about shipping goods and services overseas," he says, "and trying to get price and quantity of services and goods. The next ten years is gonna be about time and quality. We here in America can make the highest quality part much more efficiently and not have to wait to get it overseas."
While the cost of labor and shipping climbs higher around the world, American companies will be forced to bring jobs back home Belski posits. So how does he suggest investing in this trend? Here are three sectors Belski and BMO like:
"At the end of the day corporate America remains very conservative," Beslki notes. "They don't want to use their balance sheet because they're still scared and they're running their corporations like we're still in a recession so they will go out and seek a commercial loan from a bank. Regional banks are a great place for that."
"We remain the number one country in terms of patents issued in the world and we remain the technology center of the world," Belski says. As manufacturers depend more and more on new efficiencies, it's technology who will be providing it and that means shareholders stand to reap the benefits.
If manufacturing booms again it stands to reason this sector would see some significant gains. "We think you want to own the railroads to ship the goods and services," Belski says. He also likes large conglomerates with exposure around the world but particularly in North America as they too will benefit from any resurgence in production.