6 Industrial Stocks Gurus Favor

Market indexes rallied on Thursday morning on the back of lawmakers reaching an agreement to increase the debt ceiling in the short term, putting the averages in the green for the week.

Beginning to reverse from previous declines on Wednesday, the Dow Jones Industrial Average rose about 530 points, or 1.5%, on Thursday morning, while the S&P 500 gained 1.5% and the Nasdaq jumped 1.65%.

Based on these developments, investors may be looking for good opportunities that gurus also see value in. According to the Aggregated Portfolio, a Premium GuruFocus feature, as of Oct. 7, industrial companies that are popular among gurus include Honeywell International Inc. (

HON, Financial), United Parcel Service Inc. (UPS, Financial), 3M Co. (MMM, Financial), Rockwell Automation Inc. (ROK, Financial), Union Pacific Corp. (UNP, Financial) and Lockheed Martin Corp. (LMT, Financial).

Honeywell International

With a combined equity portfolio weight of 13.92%, 14 gurus are invested in Honeywell (

HON, Financial).

The Charlotte, North Carolina-based manufacturing and technology company has a $151.19 billion market cap; its shares were trading around $218.98 on Thursday with a price-earnings ratio of 31.06, a price-book ratio of 8.42 and a price-sales ratio of 4.55.

The GF Value Line suggests the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections.

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GuruFocus rated Honeywell’s financial strength 5 out of 10. In addition to adequate interest coverage, the company has a high Altman Z-Score of 3.9, meaning it is in good standing. The return on invested capital also overshadows the weighted average cost of capital, indicating value is being created as the company grows.

The company’s profitability fared better, scoring a 7 out of 10 rating on the back of an expanding operating marin as well as strong returns on equity, assets and capital that outperform over half of its competitors. Honeywell also has a moderate Piotroski F-Score of 5 out of 9, which means business conditions are typical for a stable company. As a result of revenue per share declining in the past several years, the predictability rank of one out of five stars is on watch. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.

Of the gurus invested in Honeywell, Pioneer Investments has the largest stake with 0.27% of its outstanding shares.


Diamond Hill Capital
(Trades, Portfolio),
Mairs and Power
(Trades, Portfolio),
Elfun Trusts
(Trades, Portfolio),
Mario Gabelli
(Trades, Portfolio),
PRIMECAP Management
(Trades, Portfolio),
Ken Fisher
(Trades, Portfolio),
Paul Tudor Jones
(Trades, Portfolio),
Steven Cohen
(Trades, Portfolio) and
Joel Greenblatt
(Trades, Portfolio) also have positions in the stock.

United Parcel Service

Thirteen gurus have positions in United Parcel Service (

UPS, Financial), representing a combined weight of 12.45%.

Commonly known as UPS, the shipping and logistics company, which is headquartered in Atlanta, has a market cap of $158.73 billion; its shares were trading around $182.23 on Thursday with a price-earnings ratio of 26, a price-book ratio of 14.71 and a price-sales ratio of 1.74.

According to the GF Value Line, the stock is modestly overvalued currently.

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UPS’s financial strength was rated 5 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company’s Altman Z-Score of 3.99 indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also eclipses the WACC, implying good value creation is occurring.

The company’s profitability scored an 8 out of 10 rating despite having declining margins. Its returns, however, outperform a majority of industry peers. UPS also has a high Piotroski F-Score of 8, meaning operations are healthy, and a one-star predictability rank.

With 0.35% of outstanding shares, PRIMECAP is the company’s largest guru shareholder. Other top guru investors include Pioneer Investments,


Bill Gates
(Trades, Portfolio)’ foundation trust, the
T Rowe Price Equity Income Fund
(Trades, Portfolio) and
Jim Simons
(Trades, Portfolio)’ Renaissance Technologies.

3M

Holding a combined portfolio weight of 3.93%, 12 gurus have positions in 3M (

MMM, Financial).

The St. Paul, Minnesota-based company, whose products range from Scotch tape to surgical masks, has a $103.94 billion market cap; its shares were trading around $179.42 on Thursday with a price-earnings ratio of 17.66, a price-book ratio of 7.19 and a price-sales ratio of 3.04.

Based on the GF Value Line, the stock appears to be fairly valued currently.

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GuruFocus rated 3M’s financial strength 5 out of 10, driven by sufficient interest coverage and a robust Altman Z-Score of 4.56. While the company may be becoming less efficient due to assets building up at a faster rate than revenue is growing, value is being created since the ROIC surpasses the WACC.

The company’s profitability scored an 8 out of 10 rating despite having a declining operating margin. 3M is supported by strong returns that outperform a majority of competitors as well as a moderate Piotroski F-Score of 5. As a result of consistent earnings and revenue growth, it also has a 3.5-star predictability rank. GuruFocus says companies with this rank return, on average, 9.3% annually.

Fisher is the company’s largest guru shareholder with a 0.93% stake. Pioneer,


Mairs and Power
(Trades, Portfolio),
Jeremy Grantham
(Trades, Portfolio),
Tweedy Browne
(Trades, Portfolio),
Tom Gayner
(Trades, Portfolio), T. Rowe Price,
Charles Brandes
(Trades, Portfolio) and Greenblatt also own 3M shares.

Rockwell Automation

A total of 12 gurus have a position in Rockwell Automation (

ROK, Financial), carrying a combined equity portfolio weight of 6.46%.

Headquartered in Milwaukee, the company, which provides industrial automation and information technology solutions, has a market cap of $35.53 billion; its shares were trading around $306.04 on Thursday with a price-earnings ratio of 23.25, a price-book ratio of 15.66 and a price-sales ratio of 5.3.

The GF Value Line suggests the stock is currently significantly overvalued.

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Rockwell’s financial strength was rated 5 out of 10 by GuruFocus. Despite the company issuing approximately $711.2 million in new long-term debt over the past several years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 6.4 indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also exceeds the WACC, hinting at value creation.

The company’s profitability fared even better with an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6. Steady earnings and revenue growth contributed to a three-star predictability rank. GuruFocus data show companies with this rank return an annual average of 8.2%.

Of the gurus invested in Rockwell, Pioneer Investments has the largest holding with a 1.51% stake. PRIMECAP,


Mairs and Power
(Trades, Portfolio), Fisher, Gayner, Gabelli,
Ray Dalio
(Trades, Portfolio),
Murray Stahl
(Trades, Portfolio) and Jones also have positions in the stock.

Union Pacific

With a combined equity portfolio weight of 4.53%, Union Pacific (

UNP, Financial) is held by 11 gurus.

The Omaha, Nebraska-based railroad company has a $138.3 billion market cap; its shares were trading around $212.36 on Thursday with a price-earnings ratio of 24.15, a price-book ratio of 9.69 and a price-sales ratio of 6.91.

According to the GF Value Line, the stock is modestly overvalued currently.

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GuruFocus rated Union Pacific’s financial strength 4 out of 10. Although the company has issued approximately $6.9 billion in new long-term debt over the past three year, it is at a manageable level as a result of sufficient interest coverage. The high Altman Z-Score of 3.72 suggests the company is in good standing. Value creation is also occurring as the ROIC outperforms the WACC.

The company’s profitability did even better, nabbing an 8 out of 10 rating on the back of operating margin expansion, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6. Consistent growth in earnings and revenue contributed to Union Pacific’s 3.5-star predictability rank.

Of the gurus invested in Union Pacific, Fisher has the largest stake with 0.71% of its outstanding shares. PRIMECAP, Pioneer Investments and


First Eagle Investment
(Trades, Portfolio) also have notable holdings in the railroad company.

Lockheed Martin

Ten gurus have positions in Lockheed Martin (

LMT, Financial), accounting for a combined weight of 4.2% in their equity portfolios.

The aerospace and defense company, which is headquartered in Bethesda, Maryland, has a market cap of $97.62 billion; its shares were trading around $352.37 on Thursday with a price-earnings ratio of 13.81, a price-book ratio of 14.92 and a price-sales ratio of 1.49.

Based on the GF Value Line, the stock appears to be modestly undervalued currently.

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Lockheed Martin’s financial strength was rated 5 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company’s Altman Z-Score of 3.86 indicates it is in good standing. The ROIC also outweighs the WACC, implying good value creation is occurring.

The company’s profitability scored an 8 out of 10 rating. In addition to operating margin expansion, its returns outperform a majority of industry peers. Lockheed Martin also has a high Piotroski F-Score of 7 and a one-star predictability rank.

With 0.13% of outstanding shares,


Yacktman Asset Management
(Trades, Portfolio) has the largest stake in Lockheed Martin. Other top guru shareholders include
Catherine Wood
(Trades, Portfolio), Simons’ firm, Cohen, Pioneer and Jones.

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