Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn
as the industry has shed 10.4% over the past six months. This performance was worse than the S&P 500’s 2% fall.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one resilient industrials stock at the top of our wish list and two best left ignored.
Two Industrials Stocks to Sell:
Acuity Brands (AYI)
Market Cap: $7.40 billion
One of the pioneers of smart lights, Acuity (NYSE:AYI) designs and manufactures light fixtures and building management systems used in various industries.
Why Do We Think Twice About AYI?
Annual sales declines of 1.9% for the past two years show its products and services struggled to connect with the market during this cycle
Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
Free cash flow margin shrank by 2.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.
Why Do We Avoid THO?
Annual sales declines of 17.4% for the past two years show its products and services struggled to connect with the market during this cycle
Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
With a significant portion of its products made from recycled materials, AZEK (NYSE:AZEK) designs and manufactures goods for outdoor living spaces.
Why Should You Buy AZEK?
Average organic revenue growth of 10.7% over the past two years demonstrates its ability to expand independently without relying on acquisitions
Operating margin expanded by 16.2 percentage points over the last five years as it scaled and became more efficient
Share repurchases have amplified shareholder returns as its annual earnings per share growth of 41.3% exceeded its revenue gains over the last two years
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate.
Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
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