Our rating on the Industrial sector is Over-Weight. After enduring the challenges of the pandemic, the cyclical stocks in the Industrial sector appear well-positioned within the changing political environment. Specifically, we believe that Industrial stocks will benefit from enhanced infrastructure investment and more-lenient trade policies during the Biden administration. The Industrial sector accounts for 8% of S&P 500 market capitalization. Over the past five years, the weighting has ranged from 7% to 12%. We think that investors should allocate 9%-10% of their diversified portfolios to the group. The sector includes industries such as transportation, aerospace & defense, heavy machinery, and electrical equipment. The sector is underperforming the market thus far in 2021, with a gain of 13.5%. It also underperformed in 2020, with a gain of 9.0%, and slightly underperformed in 2019, with a gain of 26.8%. Here are some of our top picks, all of which are rated BUY at Argus.

Vickers Stock Research, a subsidiary of Argus Research Group, tracks and analyzes insider trading and institutional ownership trends. Form 13-Fs are due 45 days after the end of calendar quarters, and have now come in from 2Q21. We like to review the 13Fs of the major activist investors, including Carl Icahn, Trian Fund Management, Jana Partners, and ValueAct Holdings, among others. Activist investing has evolved in recent years and is now less about generating a short-term return on an underpriced stock and more about achieving long-term returns through an active management/investor partnership. Here are some recent new purchases and key holdings of activist investors, according to Vickers.

Stocks were mixed on Friday morning after Austria reimposed a full lockdown to combat soaring cases of the Delta variant and the German government contemplated similar measures. Investors also weighed prospects for the Biden administration's social spending and climate change bill, which was narrowly approved by the House but faces a difficult path in the Senate. The Dow fell 0.7%, the S&P fell 0.1%, and the Nasdaq rose 0.5%. Crude oil fell nearly 3% to $77 per barrel, while gold rose slightly to $1863 per ounce.

So far, it has been a very good year for U.S. stocks -- and with favorable seasonals, we could see additional gains before the ball drops. Starting at the top, and looking at the major indices, the Dow Jones Transport Average is up a whopping 32%, followed by the S&P SmallCap 600, with a 29% gain. The Nasdaq 100 has popped 27%, while the S&P 100, the S&P MidCap 400, and the S&P 500 all have tacked on 25%. The Nasdaq Composite has risen 24%, the Russell 2000 has added 21%, the Dow Jones Industrial Average is up 20%, and the NYSE Composite is ahead by 18%. Pretty steady from top to bottom and it's hard to complain about such clustered returns.

Investors hunting for stocks that reasonably balance long-term growth and current value characteristics might want to look at companies in the Financial Services, Technology and Healthcare sectors. These are among the industry groups that currently are selling for (price/earnings)/(growth+yield) ratios at or below the S&P 500's ratio of 2.3x. To generate the PEGY ratios, we use the P/E ratio for each sector based on forward earnings for the numerator. For the denominator, we average the growth rates for the past five years along with two years of forward estimates, in order to achieve a smoother, less-volatile, earnings trend. Then we add the current yield, to approximate total return. Premium-valued sectors with low growth rates include Consumer Staples and Utilities. Our over-weight sectors include Healthcare, Financial Services, Industrial, Materials and Technology. Our under-weight sectors include Consumer Staples and Consumer Discretionary.

Is This the Corner?

Stocks fell on Tuesday morning, pulling back from new record highs on Monday amid more signs of persistent inflation. The Labor Department said that its producer price index for final demand rose 0.6% in October, up from 0.5% in September and in line with the Reuters consensus forecast. GE shares rose 4% after the company announced that it would split into three new publicly traded firms focused on healthcare, energy, and aviation. The Dow fell 0.6%, the S&P 0.5%, and the Nasdaq 0.5%. Crude oil traded near $83 per barrel, while gold fell $2 to $1826 per ounce.

Over the weekend, the House of Representatives approved the largest public works bill since the 1950s. The bipartisan trillion-dollar bill, which was passed by the Senate in August, now goes to President Biden's desk for signing. The plan focuses on improving the country's infrastructure, from roads and bridges to water systems and electricity grids. It also targets the auto industry, with a focus on electric vehicles and charging stations. In the power sector, Biden's goal is to achieve a carbon-free power industry by 2035. To improve energy efficiency in buildings, he is looking to retrofit four million buildings in the four years. Elsewhere, business Services companies also stand to benefit; bond issuance should pick up given that the infrastructure spending plan will be financed at least in part by bonds; and payroll companies could get a boost processing more paychecks as the infrastructure plan creates "millions of good paying jobs." All-in-all, some of the companies that we think may benefit include the following.