Industrials

We recommended buying into rail weakness in November, on the view that a poor earnings outlook was already discounted and that shipment and pricing power trends would improve as 2016 progressed, allowing cost cutting efforts to shine through. However, this…

U.S. dollar softness may be sparking a subtle shift in sub-surface dynamics, to the benefit of select deep cyclical industries. Switch from rails into electrical equipment, and take profits in data processing.

This week we are publishing a new thematic chartpack <i>The BCA China Industry Watch</i> in an effort to monitor the growth profiles, balance sheet strength and stock market performances of major Chinese industrial sectors.

The current profit backdrop for the machinery industry is grim, but the relative price ratio has already made a large downward adjustment and short interest is sky high. Importantly, machinery companies are finally addressing the need to reinvigorate…

The oversold bounce is not supported by policy or profits, and should be treated as countertrend. Lift machinery to neutral and differentiate between pharmaceuticals and the unwinding of the biotech mania.

The previous Insight showed that the overall industrials sector was in recession territory, based on the message from sinking capital goods orders. At a minimum, that argues for a highly selective investment approach. For instance, in December, we…

The industrials sector stands out as having operating margins well above its historic average, along with an elevated price/sales ratio, as shown in Table 1 from this week's report. The ISM manufacturing index heralds a reversion to the mean in profit…

Corporate profits are more sensitive to selling prices than to volumes. Falling prices even amid mildly rising volumes could produce a meaningful profit contraction. Stay with deflation trades. In particular, maintain the short EM stocks / long U.S. 30-year Treasurys position. Indian stocks are still pricey and will deflate further in absolute terms.