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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 expectations on the average. On the other hand, everybody is extremely bullish about growth stocks and expects 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 industrial companies based on their expected five-year growth rates. These stocks are at least $5 billion in market cap. The data source is Yahoo Finance. Contrarian investors should look into the stocks at the top of the table.

Company name

Symbol

Forward P/E

Expected 5-Year Growth Rate

L-3 Communications

LLL

7.46

7.10

General Dynamics

GD

8.05

7.39

Northrop Grumman

NOC

7.69

7.93

Raytheon Company

RTN

7.65

8.50

Lockheed Martin

LMT

8.74

8.57

ITT Corporation

ITT

8.66

9.41

Rockwell Collins, Inc.

COL

12.33

10.02

Fluor Corporation

FLR

12.8

10.16

Pall Corporation

PLL

13.21

11.01

Ingersoll-Rand PLC

IR

8.6

11.03

The Boeing Company

BA

12.22

11.11

3M Company

MMM

11.4

12.26

Illinois Tool Works Inc.

ITW

10.44

12.28

Goodrich Corporation

GR

17.58

12.38

Deere & Company

DE

9.59

12.62

Honeywell

HON

10.54

13.51

Fastenal Company

FAST

23.86

13.63

Joy Global Inc.

JOYG

10.09

15.52

Cummins Inc.

CMI

9.18

16.39

Caterpillar Inc.

CAT

8.81

17.27

LLL has the lowest expected growth rate among the industrial companies in our list. Its forward P/E ratio is less than 7.5. Ken Griffin held about 49 million in LLL and increased his holdings by 5-fold during the second quarter. D.E Shaw initiated a brand new $9.4 million LLL position. Steven Cohen and Ray Dalio held more than $5 million in LLL at the end of June.

There are other consumer companies trading at lower prices because of low expected growth rates: GD and NOC. One of the stocks hedge funds are extremely bullish about is GD. Thomas Steyer held more than $100 million in GD. Tom Gayner had $29 million invested in GD at the end of June. Ray Dalio doubled his holdings in GD shares during the second quarter. Jim Simons initiated $22 million positions in GD during the second quarter.

Another stock that hedge funds heavily invested during the past few months is NOC. David Dreman invested more than $20 million at the end of June. George Soros held more than $7 million positions in NOC. Joel Greenblatt increased his holdings in NOC by 5-fold. D.E Shaw initiated $7.8 million position in NOC.

RTN is also a promising stock. Ken Griffin had $20 million in RTN shares and increased his positions by nearly 20-fold during the second quarter. Israel Englander invested $7.8 million in RTN at the end of June. Bill Miller also initiated $1.5 million in RTN during the second quarter. Steven Cohen, Ray Dalio and George Soros also had RTN positions.

Usually stocks with higher expected growth rates trade at much higher multiples. Some of the stocks with higher expected growth rates in our list have very attractive multiples. CAT, CMI, JOYG and HON deserve a closer look.

We like industrial goods stocks, and believe that they are indeed trading at attractive multiples. However, if global economy significantly slows down or slips into recession, these stocks will definitely get cheaper, and that will be a better time to buy these stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: High-Upside Industrials To Buy On Dips