Industrial Sector in Focus Dear Reader,
The top-performing sector of the S&P 500 last week was the industrial sector, up 4.3% against the benchmark index’s 2.9% gain. You can read more about each sector’s performance in yesterday’s issue.
I also pointed out yesterday how the industrial sector has held up well since the announcement of sweeping tariffs on April 2.
Today, we’re going to take a closer look at the 65 industrial stocks in the S&P 500.
I’ll examine the fundamental factors (Value, Quality and Growth) of these stocks to see where we can find robust, well-rounded stocks in the sector.
Let’s dig in… | 
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A $36 trillion ticking time bomb is about to explode and take the U.S. economy and stock market down with it. This story is unraveling quickly—yet no one is talking about—though they should be, and they soon will be. WATCH NOW. | Industrial Sector X-Ray The first step in assessing the strength of any sector is to examine its trend to see if it’s up or down over the medium-term.
In my option-trading Max Profit Alert service, I use a 6-month lookback to size up a sector’s medium-term trend. Currently, 8 of the 11 major sectors are in a downtrend, including the industrial sector.
This means we wouldn’t want to make a bullish, momentum-style options trade on the sector. However, investors who are oriented to the long run can potentially use the current broad market pullback as an opportunity to buy good stocks at favorable prices.
But to do that, we have to look at more than the sector’s medium-term trend. We have to dig deeper into the sector’s individual stocks to see where the value is.
Once the sector reclaims its positive trend, highly-rated stocks bought at discounted prices could soar. Meanwhile, we also have to be cautious of so-called “value traps,” which are stocks that look cheap … but are cheap for a reason (i.e. declining or poor-quality businesses).
First, let’s have a look at the sector’s breakdown of bullish, bearish and neutral ratings.
My system’s Overall rating can be categorized into one of three buckets: - Bullish (stocks rated 60 to 100).
- Neutral (stocks rated 40 to 60).
- Bearish (stocks rated 0 to 40).
Here’s how my system is rating the sector currently:  As you can see, only 8% of stocks in the sector rate “Bullish.” For reference, 26% of stocks in the entire S&P 500 universe rate “Bullish,” so the sector is subpar in this regard.
Next, let’s examine where there are pockets of opportunity in the sector … Factor Breakdown of the Industrials Sector While few stocks in the industrial sector currently rate “bullish” overall, we can still see the positive aspects of these stocks by checking to see how many rate bullish or better on individual factors.
Here, I’ve listed in descending order the factors with the most “bullish” stocks. Here’s how the industrial sector shapes up:  This breakdown shows that there are many quality companies (57) in the sector, and even companies still showing strong growth (30).
In short, the companies in this sector look to be in good shape. It’s their stock prices that pose a challenge … as a minority of them have positive momentum (11), and even fewer (10) are trading at attractive valuations.
Ideally, if you’re scooping up a new stock position in this environment, you want a favorable combination of all three: quality, growth and value. | We recently asked a competitive intelligence specialist to investigate a massive land auction, sanctioned by the U.S. government. That led us to the Wah Wah mountains in Utah... where a massive new energy breakthrough could unlock 30,000 years of all-American energy, according to energy experts. Energy Secretary and former oilman Chris Wright called it an "awesome resource." Here's the name of the ONE company at the heart of it all. | We ran one last screen to see how many stocks in the industrial sector earn bullish or better rating across all three of those factors, and here’s what we found:  As you can see, four stocks met the criteria of rating “bullish” on all three individual factors.
And for two of the stocks, that’s more than enough to also earn a “bullish” overall rating: Cummins Inc. (CMI) and Leidos Holdings Inc. (LDOS).
Cummins Inc. designs, manufactures, and distributes engines, electric vehicle components and power generation products. It is best known for its large truck engines.
A focus on domestic manufacturing could mean an increased demand for trucks to move goods from point A to point B. Cummins could see demand increase for its high-powered engines in the immediate future.
Meanwhile, Leidos Holdings works closely with the American defense, aviation, and information technology industries to provide engineering, systems integration and technical services.
With national security a priority for the Trump administration, Leidos has a front-row seat to industry growth.
In both CMI and LDOS, we have well-rounded mix of quality, growth and value.
Not surprisingly, that means they earn a “bullish” overall rating.
To good profits, 
Adam O'Dell
Editor, What My System Says Today
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