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Quarter-End Insights

Industrials: High-Quality Industrials Are on Sale

Valuations look more attractive now as the market reacts to persistent near-term headwinds affecting several industrial subsectors.

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  • Our industrials coverage currently trades almost 3% below fair value, changing course after our prior quarterly update when the sector was overvalued by nearly 4%.
  • Increasing concerns about supply imbalance in oil and gas along with a weakening Chinese economy contributed to a sell-off in many industrial names with economic moats.
  • Longer term, we believe that near-term headwinds crimping organic revenue growth in the sector will abate; therefore, this recent pullback gives investors an opportunity to buy high-quality names with sustainable competitive advantages at a discount.

Barbara Noverini does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.