Is now the time to do industrials as a sector vs tech/healthcare?
I currently am a generalist junior during buy side public equities (ignore title) and I am thinking of which sector to specialize in/cover on my team when the need arises. I like industrials a lot but my mentor (PM at another shop) warned me against specializing in it, saying that US industrials/PMI have been crap for a long while. He instead told me tech/healthcare has been were the money is.
However, right now, it seems like tech is overconcentrated in Mag-7 on the large cap side, and the small cap names are getting eating by AI or large caps who can invest in AI to make their own businesses. Healthcare is suffering from massive funding cuts in this admin/pressure on drug pricing (which I do support as an American).
On the other hand, we as the US invested so much into the software world over the last few decades because the returns there have been stronger than in hard assets/industrials. Now we have a million pizza delivery apps while AI is eating the TAM. Is it time for hard assets and industrials to shine? As a country we noticed how much China has been investing in building out manufacturing/infra/power generation/EVs/batteries and are starting to try to recoup the gap in a serious manner.
I am not opposed to industrials and think it may be bullish for separate reasons, but your logic is that of a middle-schooler. I refuse to believe you are a junior in this industry.
Same. If you look at the components of the XLI, all those largecap companies will be around forever.
I am amused however by trying to time your career with the industry cycle. I can understand questioning whether oil or tobacco are going to be around in the future. But industrials?
They have been around forever, but let's compare the performance of US industrials to US tech stocks for a sec.
Agreed;
OP, your reasoning for being pro-Industrials is your lack of faith in TMT?
Industrials will be constant in any IB - honestly, it’s constant everywhere, regardless. TMT’s ebb-and-flow is a consistent eminence and will both slow down and speed up dramatically. Ind (or, PUI) is going to be consistently relevant regardless of economic upshots and downturns.
Pls, stop chasing greed and think about an industry u want to (watch) grow.
There are always opportunities in all corners of the market, forget about where we are in the cycle. Technology may be the biggest sector and more recently has had the strongest returns, but the companies come & go more frequently. In industrials or financials or healthcare, the biggest companies today are (mostly) the same biggest companies of 20-30 years ago. For some companies the macro is the critical driver, for other companies it isn't. For me, I like slower moving industries; they suit me and my personality better. These are the sorts of factors to consider.
I'm just wondering though - since the samebig industrials companies have been around since 20-30 years ago, wouldn't that mean the sector is less volatile than say tech/healthcare and there's less mispricings and thus less money to be made?
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