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Should You Invest in the Industrial Sector in 2022? 3 Industrial Stocks to Consider

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A healing economy often favors specific sectors, and the industrial sector is no exception. In fact, forward-thinking vaccines were thought to be the savior and bolster the economy in 2021. But in 2021, certain sectors ran out of steam and Q3 saw commodity-related cyclical sectors lag, including energy, industrials and materials. Investors tended to favor communication services, utilities and health care.

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It’s a new year, but should you load up on industrial stocks or not even entertain the idea? Let’s walk through some up-and-comers in this sector that you may want to add to your portfolio in 2022.

What is the Industrial Sector?

The industrial sector is a segment of the economy that involves businesses that help other businesses manufacture and distribute their products. Since products and services go to other businesses rather than directly to consumers, it’s considered a secondary sector driven by supply and demand from other businesses in other sectors. 

Divisions within the Industrial Sector

The industrial goods sector includes companies involved with aerospace and defense, industrial machinery, tools, lumber production, construction, waste management, manufactured housing, and cement production. Let’s go through each one of these divisions.

  • Aerospace and defense: The industrial sector includes the aerospace and defense industry, which manufactures civil or military aerospace and defense equipment, parts or products. Examples of products include military aircraft, helicopters, drones, tanks, ships and other marine vessels. 
  • Industrial machinery and tools: Industrial machinery builds tools and heavy equipment for the construction and mining industries as well as machines for infrastructure development in energy production and distribution. Industrial machinery formation may use a variety of processes, such as metal forming, casting, forging, welding and more. Tools and fabrication equipment in the industry can range from small-scale machinery to smaller components. For example, the industry may involve power saws, drills, hand tools, metal-working machines, polishing machines, presses, boilers, industrial ovens, small parts and hardware and facility equipment (industrial heaters, furnaces, forklifts and other types of large industrial machinery.)
  • Lumber: The lumber industry refers to forestry, logging and the production of primary forest products and wood products like furniture and secondary products like wood pulp.
  • Construction: The construction industry focuses on larger manufacturing and industrial buildings, such as the construction of waste and garbage disposal plants, factories, plants, mills, industrial laboratories and testing facilities.
  • Waste management: The waste management industry concerns all of waste management, waste dumping, waste recycling and waste prevention.
  • Manufactured housing: Manufactured housing concerns itself with home units constructed primarily or entirely off-site prior to being moved to a piece of property where it is set, put together in factories.
  • Cement production: Concrete is used to construct buildings, highways, bridges, roads and more and benefits from large infrastructure production.

Does this list give you any burgeoning ideas of stocks you might want to consider?

Three Stocks to Consider in the Industrial Sector

The year 2022 could bring about healthy earnings due to underlying demand and normalizing supply chain and inflation that may turn 2022’s head. How might you outfit your portfolio within the industrial sector? Give these stocks a try. 

Generac Holdings (NYSE: GNRC)

Generac Holdings Inc. (NYSE: GNRC), headquartered in  designs and manufactures power generation equipment and other power products such as energy storage systems and power products for the residential, light commercial and industrial markets. Generac manufactures portable, residential, commercial and industrial generators. 

The company’s production rose in Q3 2021 and showed year-over-year revenue growth of 34% to a record $943 million and shows consistent market outperformance. Residential product sales grew 33% to $609 million, a wide margin, up from $459 million in sales from last year. Its commercial and industrial product sales increased 47% to $258 million, up from $176 million in the prior year. Positive sales, earnings and stock price momentum puts Generac squarely in .

This year, the company acquired:

  • Chilicon Power, a designer and provider of solar grid-interactive microinverter and monitoring solutions.
  • Apricity Code Corporation, a company that develops energy technology solutions.
  • Off Grid Energy, a designer and manufacturer of industrial-grade energy storage systems in the United Kingdom.
  • Tank Utility, a provider of IoT propane tank monitoring solutions for propane fuel logistics.

It also signed a purchase agreement to acquire ecobee, which makes smart thermostats for energy savings. 

Builders FirstSource Inc. (NYSE: BLDR)

Builders FirstSource Inc., headquartered in Dallas, supplies and manufactures building materials, manufactured components and construction services for factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork, trim and engineered wood.The company creates the items for homebuilders, subcontractors, remodelers and consumers in all areas of the country.  

Q3 considerable outperformance, with net sales for the period totaling $5.5 billion, a 62.7% increase. Core organic sales increased by 16.1%, while commodity price inflation contributed 38.6% to net sales. Core organic sales grew by an estimated 31.2%, led by 44.6% growth in manufactured products.

The company expects strong demand in single-family housing and strategies to drive above-market growth.

Applied Industrial Technologies (NYSE: AIT)

Applied Industrial Technologies (NYSE: AIT), based in Cleveland, Ohio, is one of the largest distributors and service providers of industrial motion and control technologies, with a focus on bearings, power transmission, fluid power, flow control, and automation solutions. Its service center-based distribution segment provides customers with a wide range of industrial products through a network of service centers and its fluid power and flow control businesses specialize in distributing, creating and repairing hydraulic and pneumatic fluid power technologies and engineered flow control products and services. 

Q1 results showed net sales of $891.7 million, up 19.2% year over year. Applied Industrial Technologies was up 16.3% on an organic basis and showed a net income of $53 million, or $1.36 per Share and free cash flow of $45 million. If you’re after dividends, the company also announced a quarterly cash dividend of $0.33 per common share.

Ready to Add Industrial Stock to Your Collection?

When looking for investment opportunities in the industrial sector, look for stocks poised for growth and overall long-run gains. Look carefully into a company’s financial history — a history of revenue and earnings growth can be a sign of great things to come.

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Dune: Awakening is an open world survival MMO

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Dune: Awakening made its debut at The Game Awards as an open world survival massively multiplayer online game.

The game from Funcom and Nukklear looks beautiful, full of very detailed imagery of the desert planet Arrakis, also known as Dune. The game asked for beta signups, but we got no other information. Survival is the key word. Dune is a very deadly world, with sandworms and an unforgiving climate.

You can see places in the trailer like the city of Arakeen by day and night, as well as desert biomes and more. It’s not clear when it is coming. With luck, it will be close to the second Dune movie coming in late 2023.

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Rumors confirmed, Street Fighter 6 kicks off in June 2023

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Fighting Game fans are excited now that Capcom announced that Street Fighter 6 is coming to PS5, PS4, Xbox Series X/S and PC on June 2, 2023. The game was initially announced in February 2022, but that reveal did not include a specific release date beyond 2023.

The trailer at The Game Awards focused on new mini games and the international setting. In addition to the 18 previously announced fighter, the trailer also confirms that several new fighters — Dee Jay, Manon, Marisa and JP — that will join the game’s roster.

Notably, the June 2 release date for Street Fighter 6 may be a strategic choice for Capcom. June is the very beginning of Q3.

The last installment of the franchise — Street Fighter V — released nearly seven years ago so fans have been eager for another installment. A day before The Game Awards, the game’s June release date was leaked via the PlayStation Store.

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5 Things to Do Now to Propel Your Business in 2023

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Opinions expressed by Entrepreneur contributors are their own.

Entrepreneurship is a daily leap of faith. In times of economic uncertainty, that leap may feel like a dive off a cliff. We are in one of those times. It likely will take months to fully re-adjust to the forces that have pummeled the world’s economy, and to entrepreneurs, months can feel like years.

With the right playbook, entrepreneurs can survive and thrive in whatever economic scenario. Here are five things you can do to propel your business ahead now and through the difficulties of business cycles for years to come.

1. Learn the lessons of more challenging times

A rocky economy presents a unique opportunity to make tough decisions about the business plan. Everything is open to reexamination. How has the market changed? Are your customers facing challenges that create new opportunities for your solutions? How do new conditions change your assumptions, and what actions do you need to take in response?

Critically evaluate your product roadmap. Is this the time to pivot or become more aggressive with your current plans? Prioritize the highest margin features that are achievable in the next twelve months. Push out projects that don’t make that list, and re-assign resources accordingly. Re-assess pricing. Even as inflation tiptoes back from the highest levels in forty years, raw material and transportation costs remain way up. What will impact your customers if you adjust the pricing or add surcharges to offset these costs, at least temporarily?

It’s been a rough year for hiring. Many companies took the talent they could get. If there are employees or gig workers who would fare better in a different job, now is the time to let them go. Make tough-minded corrections that will pay off overall — corrections that might be avoidable in less challenging times.

Related: How to Turn Inflation and Recession into Your Largest Business Opportunity

2. Tighten your grip on cash

Venture capitalists are pulling back. In the third quarter, Crunchbase reported that funding for startups in U.S. and Canada fell 50% year-over-year. Valuations are down across the board. If you are fortunate enough to be a later-stage startup that benefited from VC largess in 2021, make your last raise last longer than intended.

Keep your dry powder dry, and put off going for another round until the markets even out. Reemphasize the basics for early-stage companies with less market validation and greater distance between now and a potential exit. Delay all capital expenditures. Leverage the hybrid work model if possible, to reduce rent and other office expenses. Continue with Zoom or Google Meet. Now is not the time to rack up travel costs. Re-negotiate fees and terms with service providers. Seek credit terms with key suppliers, in a word, bootstrap.

3. Talk to customers, in person. Now.

How have the business needs of your customers — whether paying or beta — changed over the last 18 months? Are there benefits to your solution that have more recognized value now? Nearly every business, for example, from corporates to startups, has been forced to re-learn the lessons of supply chain management. Startups that can help their customers make better business decisions based on artificial intelligence (AI), reduce costs by improving inventory management or protect against out-of-stock scenarios by identifying and building relationships with new, more local sources of supply will have an edge.

Related: Finding Validation in Serving Customers

4. Non-dilutive capital

According to PitchBook, venture capitalists are showing greater interest in portfolio companies “whose satellite, robotics and software tools can do double duty” in military and commercial markets. International conflicts are one reason, of course.

Another is that the defense and military security industries are generally viewed as recession-proof. Our firm routinely encourages portfolio companies to consider non-dilutive funding from the Small Business Administration — grants to support cutting-edge technologies range from $150,000 to more than $1 million.

Navigating the application process isn’t for the faint of heart. A startup must be realistic about the work involved, but in many states, there are resources to help. Besides the funding, severe responses to agency requests for proposals are reviewed and evaluated by technologists. At a minimum, this can be terrific feedback and a great source of industry contacts.

5. Blue-chip cultures attract blue-chip talent

Company culture can be an asset or a liability. An inclusive, rich culture helps key hires say yes. Finding stakeholders that believe what you believe and are aligned with your team’s values significantly improves the odds that they will stick with you in good times or bad.

After months of “great resignation” fever, the over-heated demand for talent may be cooling off. Maybe offers aren’t as fast or grand as they were a year ago. Maybe Twitter won’t be the only advanced technology business to let people go. Regardless, the search for great talent isn’t a faucet that a young company turns off and on. A startup might modulate the timing or the number of hires but stand at the ready to recruit and filter for culture fit.

Related: 3 Ways to Stay Competitive in the War for Talent

With the right mindset and intentional approach, an entrepreneur can make 2023 a year to strive and thrive. As Yogi Berra, my favorite baseball player of all time, said, “Swing at the strikes.” In business, like baseball, the right swing can turn even the most challenging pitch into a hit.

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