U.S. Manufacturing Vitality Offers Opportunities
by Carl Delfeld, Investment U Senior Analyst
Thursday, January 12, 2011: Issue #1685
I hail from Milwaukee – the heart of America’s industrial backbone.
My father and his two brothers all graduated from Marquette University with degrees in engineering. My Dad was an industrial and manufacturing engineer working for giants like Allis-Chalmers and smaller companies like Pressed Steel Tank.
Sadly, my only contribution to American industry was pitching industrial stocks to institutional investors in Tokyo, Hong Kong and Sydney during the mid-1980s. Given the growing perception that American manufacturing was on a path to oblivion – it was like pounding your head against a wall.
The perception of a manufacturing base in decline is largely tied to manufacturing jobs that have dropped sharply from 19.6 million in 1979 to 11.8 million today.
The truth is far more positive and encouraging.
- U.S. manufacturing workers are standout performers with productivity rates five times that of Chinese workers.
- American manufacturing output is roughly equal to that produced by China and equal to the entire economy of India! The value of American manufactured exports over the latest 12-month period is $1.074 trillion (not adjusted for inflation) according to The New York Times.
- America is the largest exporter of advanced manufactured products in the world. The United States is particularly strong in machinery, chemicals and transportation equipment, which together make up nearly half of the exports.
And lately, manufacturing has been a bright spot in a rather sluggish U.S. economy.
The U.S. Labor Department reported that manufacturing companies have added jobs in two consecutive years. Until last year, there had not been a single year when manufacturing employment rose since 1997.
Another favorable trend is that companies are beginning to move some offshore manufacturing back home. This is driven by higher labor costs in countries like China, plus the desire to protect intellectual property and bring production closer to end markets.
No wonder that a recent PricewaterhouseCoopers quarterly survey of manufacturing executives found almost 63% were optimistic about growth prospects in the next 12 months.
A More Vibrant Manufacturing Base
One manufacturing play that highlights the trend of a more vibrant manufacturing base is Honeywell (NYSE: HON).
Honeywell is a well-diversified multinational in the aerospace, climate control, special materials and auto parts business. The company is best known for its heating, cooling, ventilation, and home security products and services.
Roughly 50% of its products are linked to energy efficiency – a nice place to be right now.
CEO Dave Cody has outlined some ambitious performance targets to be achieved by 2014. The company plans to increase annual revenue growth to 9%, reduce cycle times by 30%, reduce product costs by 50%, increase revenue from emerging markets from 23% to 30%, and more than double its product sales from $4.1 billion to $9 billion by 2014.
Plus, investing in America’s manufacturing micro boom is great for your portfolio and for the country.
Good Investing,
Carl Delfeld
Article by Investment U
