Discounts Remain in Multi-Industrials
We find several undervalued stocks and one compelling bargain.
Predicting a market bottom is a fruitless exercise. In our view, the central tenet of all intelligent investing is a stock’s margin of safety, which maximizes preservation of capital through all market cycles. Although the bands of uncertainty have widened amid the global pandemic, we believe we can recalibrate and price securities in a base-case scenario based on historic economic cycles, medical data, government intervention, and market commentary from informed participants. After the late March rally, we find several discounted stocks and one compelling bargain. In this piece, we put portions of our U.S. multi-industrials coverage into four buckets: cash compounders, traditional quality, dividend aristocrats, and beaten-down value. Our favorite stocks in these respective categories are Roper Technologies (ROP), Honeywell (HON), Emerson Electric (EMR), and General Electric (GE).
Bumpy Recovery, but Short-Cycle Businesses Return First
The average discount in our U.S. multi-industrials coverage is 10%, compared with the Morningstar market fair value discount of 5%. Even so, this is a category that is arguably better positioned to benefit from a recovery, given the business-to-business mission-critical services it provides. 2020 will be a terrible year for industrial earnings, but we believe investors should look past this year when assessing underlying value.
Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.