Insider Monkey

13 Most Profitable Industrial Stocks Now

Sheryar Siddiq
16 min read

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In this article, we will look at the 13 most profitable industrial stocks now. If you want to explore similar stocks, you can also take a look at 5 Most Profitable Industrial Stocks Now.

Over the past two decades, industrial players have chased after value creation by focusing on product margin optimization, channel sales excellence, and programmatic M&A. While these strategies proved fruitful in the pre-pandemic era, the disruptive forces of COVID-19, intensified by recent geopolitical tension between Russia and Ukraine, have ushered in a new world. While the industrials sector has experienced a decent rebound from a painful pandemic-driven recession, it also emerged to find a chaotic environment characterized by dramatic shifts in consumer purchasing behaviors, labor shortages, and global supply chain networks.

In the past year, the industrials sector was largely driven by the same concerns as the broader market. High inflation—and the implications of high inflation for interest-rate policy—weighed heavily on stocks. The sector largely tracked the broad market's performance for much of the year, though after a bounce in the fourth quarter was on track to outperform the S&P 500 for the year. The industrials sector may continue to be impacted in 2023 by many of the same near-term worries as other sectors—including, most pressingly, the increased risk of US or global recession. However, for investors with a long-term view, three key trends in the sector have created opportunities for US-based industrial companies: digital technologies and processes, an increased focus on sustainability, and a revival of domestic production instead of globe-spanning supply chains.

Additionally, a recent survey by McKinsey states that executives at several industrial companies have identified three crucial priorities that have emerged during these past few years: rising costs and inflationary pressures, talent retention and skill gaps among workers, and supply chain disruptions. While many companies are still focused on post-pandemic top-line recovery alongside combating short-term disruptions to maintain operating margins, leading firms are doubling down on long-term structural changes to how they approach customer interactions, supply chain resilience, and talent retention. While a US or global recession, should one occur, could slow the progress of these changes, it would be unlikely to derail them completely.

Industrial stocks include some of the oldest public companies that seem to form the backbone of the U.S. economy while lending their name to one of the key U.S. stock market indexes, the Dow Jones Industrial Average (DJIA). Some of the best industrial stocks to buy in this context include TransDigm Group Incorporated (NYSE:TDG), Union Pacific Corporation (NYSE:UNP), and 3M Company (NYSE:MMM). Another catalyst for industrial stocks is the Russian war in Ukraine that has led to increased defense spending around the world. A quick solution to the war seems increasingly unlikely. Thus, aerospace and defense stocks are poised to outperform the broader industry in the coming months. (see also 11 Best Aerospace Stocks To Buy and 11 Best Defensive Defense Stocks to Buy Heading Into 2023)

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