The best performing stocks in the market are usually the highest growing stocks or the stocks with the highest expected growth rates. This doesn’t mean that one should be invested in growth stocks and stay away from the value stocks at all times. Historically, value stocks managed to beat the growth stocks hand over fist. The reason is simple. Value stocks are beaten down stocks with very low or negative growth expectations. Not surprisingly it is easier for these stocks to beat the expectations on the average. On the other hand, everybody is extremely bullish about growth stocks and expect them to have higher growth rates in the future. Their stock prices also reflect this fact. Not surprisingly, it is more difficult for these stocks to beat these challenging expectations.
We ranked the industrial stocks based on their expected five-year growth rates. The data source for Wall Street Analysts’ projections is Thomson Financial. Industry classifications were obtained from Fidelity. Contrarian investors should look into the stocks that are at the top of the table.
Company | Ticker | Exp. 5-Year Growth Rate | Forward PE Ratio | Market Cap |
OSHKOSH CORP | 3.6 | 9.1 | $3.2B | |
L-3 COMMUNICATIONS HOLDINGS | 4.3 | 9 | $9.1B | |
NORTHROP GRUMMAN CORP | 5.3 | 9.6 | $19.9B | |
GENERAL DYNAMICS CORP. | 6.6 | 9.9 | $28.5B | |
CORRECTIONS CORP OF AMERICA | 6.7 | 16.1 | $2.6B | |
ITT CORPORATION | 7.3 | 11.6 | $10.8B | |
URS CORP | 8.1 | 11.3 | $3.7B | |
R.R. DONNELLEY & SONS CO | 8.7 | 8.7 | $3.9B | |
ALASKA AIR GROUP | 8.8 | 7.9 | $2.2B | |
NORDSON CORPORATION | 9.1 | 15.5 | $3.9B | |
ROLLINS | 9.4 | 26.2 | $2.9B | |
EQUIFAX | 9.6 | 13.5 | $4.7B | |
WATSON WYATT WORLDWIDE | 10.0 | 12 | $4.1B | |
RAYTHEON CO. | 10.1 | 9.1 | $18.2B | |
CLARCOR INC. | 10.1 | 17.2 | $2.2B | |
3M CO | 10.2 | 13.3 | $66.1B | |
KBR INC | 10.8 | 15.1 | $5.6B | |
CINTAS CORPORATION | 10.9 | 16.3 | $4.3B | |
GRAINGER (W.W.) INC. | 11.1 | 15.5 | $9.6B | |
VERISK ANALYTICS | 11.3 | 18 | $5.6B | |
PARKER HANNIFIN CORP. | 11.3 | 13.6 | $15.3B | |
AMETEK | 11.4 | 18.3 | $6.9B | |
PALL CORP. | 11.5 | 17.3 | $6.6B | |
UNITED TECHNOLOGIES CORP. | 11.6 | 13.9 | $77.5B | |
ROCKWELL COLLINS | 11.6 | 13.9 | $9.8B | |
DUN & BRADSTREET CORP (DE) | 11.6 | 11.6 | $3.9B | |
WASTE MANAGEMENT | 12.0 | 14.4 | $17.7B | |
STERICYCLE | 12.0 | 27.6 | $7.5B | |
DANAHER CORP. | 12.1 | 17 | $34.2B | |
HONEYWELL INTERNATIONAL | 12.3 | 13.5 | $46.8B | |
DOVER CORP | 12.3 | 13.5 | $12.1B | |
IDEX CORPORATION | 12.4 | 16.1 | $3.5B | |
GOODRICH CORP. | 12.5 | 13.7 | $10.6B | |
COPA HOLDINGS S.A. | 12.6 | 8.8 | $2.3B | |
REPUBLIC SERVICES | 12.6 | 13.9 | $11.6B | |
ROPER INDUSTRIES | 12.7 | 19 | $8.2B | |
NORFOLK SOUTHERN CORP. | 12.9 | 12.9 | $26.1B | |
EXPEDITORS INTL. OF WA. | 13.1 | 23.6 | $10.4B | |
DONALDSON CO. INC. | 13.2 | 19.8 | $4.7B | |
CSX CORP. | 13.3 | 13.3 | $29.5B | |
WASTE CONNECTIONS | 13.3 | 17.3 | $3.3B | |
CHICAGO BRIDGE & IRON CO. | 13.4 | 14.7 | $4.0B | |
IRON MOUNTAIN INC | 13.4 | 21.4 | $6.3B | |
ILLINOIS TOOL WORKS | 13.4 | 12.1 | $27.1B | |
SNAP-ON | 13.6 | 12.2 | $3.5B | |
GENESEE & WYOMING INC. | 13.6 | 19 | $2.4B | |
C.H. ROBINSON WORLDWIDE | 13.6 | 23.2 | $11.9B | |
JACOBS ENGINEERING GROUP | 13.7 | 16.4 | $6.2B | |
PENTAIR | 13.7 | 13.7 | $3.7B | |
GARDNER DENVER | 13.8 | 15.2 | $4.0B |
Some of these stocks have significant hedge fund ownership. Bill Ackman’s Pershing Square had $196 million in CXW at the end of December. Stephen Mandel’s Lone Pine had a $181 million position in TW. Bill Miller and Ken Fisher have MMM and UTX positions. Steve Cohen had a $300+ million position in DHR’s stocks and bonds. Ken Fisher had a $285 million position in Honeywell and a $441 million position in Dover (DOV) at the end of December. Lee Ainslie’s Maverick and Andreas Halvorsen’s Viking Global have GR in their portfolios.
We believe these stocks will be more likely to exceed their expectations and outperform their peers as a portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
