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5 Stocks to Buy as Manufacturing Activity Continues to Expand

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·5 min read
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  • KAI
  • HLIO
  • DOV
  • DE

Manufacturing activity in the United States has been putting up a great show ever since the economy reopened. In August, manufacturing activity increased once again.

One of the major reasons behind the uptick in the sector’s performance is that people are spending more on goods unlike on services during the peak of the pandemic.

Manufacturing Activity Expands

According to an ISM report released on Sep 1, Manufacturing PMI came up with a reading of 59.5%., increasing 0.4% from July’s reading of 59.5%. Manufacturing activity has now increased for the 15th consecutive month.

Last year from March to May, manufacturing activity had almost come to a standstill, when the pandemic peaked. However, the ISM PMI has remained above 50 since June 2020, when the economy started reopening. Anything above 50% indicates expansion in manufacturing activities.

The New Orders Index advanced to 66.7%, rising 1.8% from July’s reading of 64.9%. Also, the Production Index rose to 60% from July’s reading of 58.4%. The Backlog of Orders Index was at 68.2%, up 3.2% from July’s reading of 65%. Also, the New Export Orders Index jumped 0.9% to 56.6% from 55.7% in July.

Manufacturing Activity Poised to Grow

The growth in manufacturing activity since the reopening shows the underlying strength in the economy regardless of the pandemic. The jump in New Orders Index and New Export Orders is also an indication that U.S. manufactured goods are high on demand in both the domestic and international markets.

Moreover, with the vaccination drive in full swing, people are a lot more confident and businesses and factories are also fast going back to their optimum level of production. The manufacturing sector is thus only expected to grow further from here as more people get vaccinated and the economy further reopens. Also, restrictions are being lifted, which means that the economy is on track for recovery.

Also, hiring is at multi-year highs. As more jobs get created and vacancies continue to get filled up, manufacturing activity at factories is expected to accelerate.

At the same time, people are spending more, which means that new orders for goods should rise in the coming months. This comes almost as an assurance given that consumer spending increased 0.3% in July.

Our Choices

Given this scenario, it is ideal to invest in these five stocks. All these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. AIT is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. Last year, it acquired Advanced Control Solutions, known for providing automation products and engineered solutions on machine vision equipment and software. Earlier this year, the company acquired Gibson Engineering Company, Inc.

The company’s expected earnings growth rate for the current year is 12%. The Zacks Consensus Estimate for current-year earnings improved 6.2% over the past 30 days. The company has a Zacks Rank #2.

Dover Corporation DOV is an industrial conglomerate, producing a wide range of specialized industrial products and manufacturing equipment. The company said on Jul 27 that it has completed the acquisition of CDS Visuals, a provider of software as a service 3D visualization solutions, customized for industrial applications, for an undisclosed sum.

The company’s expected earnings growth rate for the current year is 32.6%. The Zacks Consensus Estimate for current-year earnings improved 7.7% over the past 60 days. The company has a Zacks Rank #2.

Deere & Company DE is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 5.1% over the past 30 days. The company has a Zacks Rank #2.

Kadant Inc KAI is a leading supplier of a range of products and systems for the global papermaking and paper-recycling industries, including de-inking systems, stock-preparation equipment, water-management systems, and papermaking accessories.

The company’s expected earnings growth rate for the current year is 48.2%. The Zacks Consensus Estimate for current-year earnings improved 22.1% over the past 30 days. The company sports a Zacks Rank #1.

Helios Technologies, Inc HLIO develops and manufactures hydraulic and electronic control solutions. The company's operating subsidiaries include Sun Hydraulics, Enovation Controls and Faster Group. Its operating business segment consists of Hydraulics and Electronics.

The company’s expected earnings growth rate for the current year is 70.5%. The Zacks Consensus Estimate for current-year earnings improved 12.7% over the past 30 days. The company carries a Zacks Rank #2.


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Dover Corporation (DOV) : Free Stock Analysis Report
 
Deere & Company (DE) : Free Stock Analysis Report
 
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Helios Technologies, Inc (HLIO) : Free Stock Analysis Report
 
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