The XLI industrial ETF rose 16% in the past month, leading the S&P 500′s 9% gain. With the government lifting lockdown measures, the sector has seen some revival of production and investors are directing their attention to industry veterans like Caterpillar and Raytheon.
Following the coronavirus pandemic, the economically sensitive group of industrial ETFs is one of the first to benefit from the recovery.
Matt Maley, chief market strategist at Miller Tabak, is using Caterpillar as a barometer for where the entire sector heads next.
The industrial machinery manufacturer ended the first quarter of 2020 with $7.1bn in enterprise cash and had $20.5bn in available liquidity as of April 2020. Not breaking with its tradition of paying a cash dividend every year since the company was formed and a quarterly dividend since 1933, the board of directors of voted to maintain the quarterly cash dividend of one dollar and three cents ($1.03) per share of common stock, payable on 20 August.
Analysts are monitoring Caterpillar’s stock performance closely with Miley seeing its market movements as a tell-tale sign of how quickly the industrial economy will bounce back.
If the stock holds its 200-day moving average to push above highs seen last week, it could indicate growing momentum in the industrials space.
With all the hype surrounding the aerospace sector, Raytheon Technologies is another stock that could mask opportunity.
“That is definitely a stock with some blemishes. I think a lot of investors would prefer to steer clear of this thing right now because of the aerospace exposure, but we feel it’s a bit overblown. I do think that cash flow is going to be weak here in the short term, but it should start to rebound in the second half of the year,” Mark Tepper, president of Strategic Wealth Partners, told CBNC on Wednesday.
Raytheon has rallied 16% this month. It remains 23% lower for the year.