Industrials were the second-worst-performing sector on Monday, sliding more than 2%.
This comes ahead of earnings reports from heavyweights Caterpillar and 3M out Tuesday.
The group has managed to gain over the past month, though, as hopes of infrastructure spending after the U.S. election rose. The XLI industrials ETF is up 3% in a month.
The election could lift the entire industrials space no matter who wins, predicts Michael Bapis, managing director of Vios Advisors at Rockefeller Capital.
“I think the irony here is we’re in one of the most contentious elections in U.S. history and if there’s one thing that both candidates agree on it’s the infrastructure spend. I think not only is the U.S. far behind other developed countries with this, just take Penn Station for example here in New York, but it’ll also help fundamentals in the country to help the markets grow. You’ll see small- and midsize businesses gain in the construction industry,” Bapis told CNBC’s “Trading Nation” on Monday.
Ari Wald, head of technical analysis at Oppenheimer, also sees the industrials outperforming.
“Industrials broadly … have been a big part of this new leadership we’ve seen in the market since the March bear market low. … If you were to kind of screen for stocks that were the poorest performers through the bear market into the March bottom and have subsequently become leadership, you see a lot of industrial stocks on there — probably less so the brand name industrial stocks, more a lot of mid-caps in there. But we do like capital goods,” Wald said during the same “Trading Nation” segment.
One name in particular stands out to Bapis.
“We think there’s going to be a flight to safety and companies like Caterpillar will be beneficiaries of this. They have done a massive and aggressive stock buyback, and they’re also … sitting in a company that the dividend yields 2.5%. In this interest rate environment to have a staple like Caterpillar with that kind of a dividend yield, and being a beneficiary of economic growth and infrastructure spend, I think they’re going to come out on top, especially if both candidates actually do spend on infrastructure,” said Bapis.
Caterpillar, reporting on Tuesday morning, is expected to post quarterly earnings of $1.17 a share, according to FactSet estimates. That would mark a sharp drop from $2.66 a share a year earlier.
Wald, meanwhile, is looking to a major trucking stock.
“Old Dominion … [is] consolidating between its September high and its 100-day moving average. Bullish trends suggest you get the breakout to the upside,” said Wald.
Old Dominion, which also reports Tuesday, is set to report profit of $1.52 a share in its September-ended quarter, up from $1.37 a year earlier.
