Do you have $ 10,000? 3 best industrial stocks to buy long term

Buying a stock for the long term implies a high degree of confidence in the security of the market position and growth prospects of the underlying company. In this context, General Electric‘s (GE 0.57% ) the disruptive plans will leave investors with companies that are major players in their fields. Likewise, Stanley Black & Decker‘s (SWK 0.34% ) leadership in the tools and hardware market and its many growth opportunities make it a very attractive equity and coatings company PPG Industries (PPG 1.13% ) occupies a leading position in a consolidating market. Here’s why all three stocks are attractive.

General Electric’s disruption plans make sense

The plan to split GE into three different companies makes sense in several ways. First, a sum of the parts analysis of GE suggests that, based on market valuations of its peers, separate companies will be worth more as stand-alone companies than they would be as part of GE.

Second, the evidence from GE’s industry peers is that a more focused approach to running each separate business – implicit in disruption plans – results in improved operating performance. In short, GE companies will be more profitable.

Image source: Getty Images.

Third, all three companies will be leaders in their fields. For example, GE Aviation is responsible for the engines that power two-thirds of commercial flight departures. In addition, GE Healthcare is one of the largest imaging companies in the world, and the combined energy company (GE Power and GE Renewable Energy) includes two leading companies in gas turbines and wind power, respectively.

As such, investors could see a significant advantage in investing in GE ahead of a disruption in the years to come.

Stanley Black & Decker has many growth prospects

If you can look past the company’s woes with supply chain issues and raw material cost increases in 2021 – and Stanley arguably isn’t alone in that regard – then invest in the stock could pay off in the future.

The impact of headwinds on costs is significant this year, with management expecting annual margins to decline in all three segments of the business. In addition, upon the publication of the third quarter results, the management of the call reduced its prospects for organic sales growth for the whole year to 16% -17% compared to 17% -18% previously. Likewise, the adjusted EPS forecast for the entire year has been reduced to $ 10.90- $ 11.10, from $ 11.35 to $ 11.65.

In a nutshell, headwinds in the company’s commodity and supply chain costs are now expected to hit $ 690 million, up from a previous estimate of $ 300 million. Sadly, CFO Lee McChesney said during the earnings call that “we are also projecting around $ 600 million to $ 650 million in deferral costs for 2022.”

A handyman.

Image source: Getty Images.

That said, management also expects a combination of pricing actions, cost reductions and mid-single-digit volume growth to more than offset carry-over costs. Meanwhile, management will work to integrate the acquisitions of MTD and Excel (lawn and garden equipment companies), which will help Stanley increase Stanley’s revenue to more than $ 20 billion in 2022, up from $ 14.5 billion in 2020. Meanwhile, the company is investing in the creation of innovative products. (cordless, improved batteries, etc.) in its main tool brands.

Wall Street analysts predict that continued cost pressures will result in a stable operating profit margin in 2022. Nonetheless, the increase in revenue of around $ 3 billion is expected to translate into an improvement in adjusted EPS to 11. , $ 75 and free cash flow of $ 1.96 billion, according to analyst estimates.

As such, the stock trades at 16 times futures earnings and less than 16 times free cash flow. This seems cheap for a company that is expected to increase sales and margin as cost headwinds subside in the future and management increases margin on acquisitions.

Paint pigments.

Image source: Getty Images.

PPG Industries is in a big industry

The paint and coatings industry isn’t the most exciting industry to invest in, but it should be a good fit for long-term investors. The point is, paint and coatings are a vital part of the global economy. From architecture to automotive, aerospace, packaging and industry in general, all of these assets need painting and coating. Thus, the growth of the sector tends to follow global growth patterns.

That’s a good thing, as it’s generally an industry characterized by mid single-digit profit margins and strong returns on equity.

PPG Return on Equity Chart

Data by YCharts

Like Stanley, all paint and primary coatings companies have had to lower their expectations this year due to supply chain disruptions and rising costs. Nonetheless, these problems will not last forever, and PPG in particular is well positioned to benefit from them in the future due to a combination of global growth and dissipating costs.

Additionally, a slew of acquisitions and mergers between Sherwin-Williams and PPG continue to solidify an already lucrative market, and investors can hope this will lead to long-term margin expansion going forward, as the major players build their scale and eliminate competition. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Myra R.

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