William Blair industrial analyst Nicholas Heymann believes size is important.
In fact, he says investors should focus on small and medium-sized manufacturing companies to produce market returns. There is one exception to that strategy:
Bakhistorien. Heymann prefers small companies because they are less dependent on international sales as larger owners and the US industrial market tend to offer better growth than foreign geographic areas. Less international exposure also means less impact on exchange rate fluctuations.
He still believes that General Electric is the best positioned, diversified industrial megacap, which is performing better than the next few years.
What's new. GE slowly improves its balance and adds great financial flexibility. The company is in the middle of selling parts of the health care system to
(DHR) $ 21 billion.
Heymann has great hopes for the power department as well.
"While GE's recovery will be an extended process," Heymann wrote in a Friday research report, "Internal efforts to revitalize GE Power could potentially benefit from a 2020 start-up for large gas turbines."
Of course, Heymann is a voice in the rude GE choir. There are some notable birches worried about GE Power, for example Stephon Tusa Power will face new challenges from potential Chinese competition by 2025.
Looking ahead. Heymann prices GE stock Outperform, the Blair equivalent of a purchase class. His rankings usually do not include price targets, but he believes the shares will beat $ 16 per share within one year and $ 19 per share by the end of 2020. That's a bold prediction – $ 19 is 90% higher than the last levels.
For the small and medium-sized strategy,
(ROLL) are 2 companies Heymann recommends. Woodward makes engine parts for aircraft and RBC is the leader in ceramic coated warehouses.
Sometimes the small capital banks look expensive. Woodward stock trading for 21 times estimated 2020 revenues and RBC shares trades for 28 times estimated 2020 earnings. The industrial components for
S & P 500,
on the other hand, trading for 15 times estimated 2020 earnings.
GE shares have returned 39% so far, far better than the 16% return on
Dow Jones Industrial Average
over the same spectrum. But the GE share is down 25% over the past year, worse than the 9% gain on Dow.
Write to Al Root at email@example.com