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US Manufacturing in the Pink: ETFs & Stocks to Play

Sanghamitra Saha

Maintaining the upbeat momentum, the U.S. manufacturing sector grew in March for 94 months in a row. Though the manufacturing index slowed a bit last month sequentially, it beat economists’ expectations.

As per the recent manufacturing report from the Institute for Supply Management (ISM), the reading was 57.2 in March (a reading of 50 or higher points to growth), down from 57.7 in February. Economists had forecast that the index would score 57 (read: ETFs to Watch on U.S. Manufacturing Revival).

Of the 18 manufacturing industries, as many as 17 recorded an increase in March with Electrical Equipment, Appliances & Components; Printing & Related Support Activities, Furniture & Related Products, Textile Mills and Machinery deserving special mention.

Employment and export orders indexes soared in the month while new orders and production were modest. Hiring jumped 4.7 percentage points to 58.9%, prices rose 2.5 percentage points to 70.5%, backlog of orders nudged up 0.5 percentage points to 57.5% and new export orders increased 4 percentage points to 59%. The export index probably got help from a soggy greenback.

However, new orders index declined 0.6 percentage points to 64.5%, production fell 5.3 percentage points to 57.6%, and imports and inventories were down 0.5 and 2.5 percentage points to 53.5% and 49%, respectively.

Market Impact

Despite assuring data points, Wall Street was in the red on April 3 as disappointing March auto sales and doubts over the materialization of Trump’s pro-growth promises (especially after the failure of Health Care plans) continued to bother investors.

As a result, most of the industrial ETFs were declined after the release of manufacturing data. Still there are some products that gained on April 3 and some that lost the least. We highlight those below as these can be intriguing picks for the coming days (see all industrials ETFs here).

ETF Choices

ARK Industrial Innovation ETF ARKQ

The fund looks to offer long-term growth of capital. It is an actively managed ETF that invests primarily at least 80% of its assets in domestic equity securities and U.S. exchange traded foreign equity securities of companies that are focused on industrial innovation (read: Sector ETFs to Win or Lose Post Jobs Data).

3D Printing (32%), Robotics (27%) and Autonomous Vehicles (27%) are the top three industries of the fund. It is heavy on Tesla (11.6%), Stratasys Ltd (9.8%) and NVIDIA Corp (6.5%) and charges 75 bps in fees. The fund added about 0.3% on April 3 and hit a 52-week high.

iShares Global Industrials ETF EXI

Though this fund is a global choice, investors can have a look at it given the uptick in overall global manufacturing momentum. The U.S. has half of the fund’s share. The top three holdings are General Electric (6.67%), 3M Co (2.91%) and Siemens AG (2.69%). The fund charges 47 bps in fees and lost about 0.5% on April 3.

Stock Choices

Below we highlight two stock picks from industries that registered solid manufacturing growth in March.

Entegris Inc. ENTG

Entegris is a provider of materials management solutions to the microelectronics industry including the semiconductor manufacturing and disk manufacturing markets. Its Zacks Industry Rank is in the top 3% and Sector Rank is in the top 31%, at the time of writing. The stock sports a Zacks Rank #2 (Buy).

Masonite International Corporation DOOR

It is a designer and manufacturer of interior and exterior doors. This stock has a Zacks Rank #1 (Strong Buy).  Its Zacks Industry Rank is in the top 14%.

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Entegris, Inc. (ENTG): Free Stock Analysis Report
 
ISHARS-GLBL IND (EXI): ETF Research Reports
 
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