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Focus on industrial stocks with strong end markets, Bernstein analyst says

Nov. 20, 2015 11:30 AM ETAllegion plc (ALLE) StockGE, DHR, MMM, IR, ETN, EMR, HON, JCI, ROK, DOV, PNR, ALLEBy: Carl Surran, SA News Editor3 Comments
  • Market growth remains challenging whether there is an industrial recession or not, so investors should focus on stocks with strong end markets, particularly Allegion (ALLE +0.3%) and Danaher (DHR +0.5%), Bernstein's Steven Winoker says.
  • Other stocks in a lower but still generally favorable tier include General Electric (GE +0.8%), Honeywell (HON +0.9%), Ingersoll-Rand (IR +0.9%) and 3M (MMM +0.7%), as these companies are exposed to favorable end markets but also to meaningfully weak markets, the analyst says.
  • Aside from their portfolio transformations, DHR and GE have benefited and should continue to benefit from their above-average growth profiles in the current low-growth environment, Winoker says.
  • Energy-heavy Dover (DOV +0.2%), Pentair (PNR +0.4%) and Emerson Electric (EMR +0.2%) remain the most challenged, according to Winoker, while Eaton (ETN +1.1%), Rockwell Automation (ROK +0.5%) and Tyco (TYC -0.2%) have a mix of tailwinds and headwinds, with the former more challenged on hydraulics/trucks and the latter two on energy.
  • Winoker sees limited downside for DOV, which is highly linked to crude oil prices but is performing well in the ~80% of its portfolio not linked to oil.
  • Earlier: Low expectations are no longer enough for multi-industry stocks, analyst says (Nov. 19)

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