This renewed emphasis on domestic production is not a sudden development. It began during Donald Trump's initial term and was further amplified by the Covid-19 pandemic, which exposed the vulnerabilities of extended global supply chains. As companies look to shorten and secure their supply lines, a move towards greater domestic manufacturing appears likely. This transition will necessitate significant investment in infrastructure and facilities, with construction spending for manufacturing facilities already having seen a substantial 20% growth in 2024, tripling since 2019.
Against this backdrop, Barron's highlights the following companies as key players in this potential industrial revival:
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CRH: In the construction sector, CRH stands out as a global leader in building materials and construction. Although headquartered in Dublin, the company derives 61% of its revenue from the U.S.. CRH's vertically integrated business model, encompassing the production of aggregates, cement, and asphalt, as well as road and infrastructure construction, positions it to capitalize on the entire value chain of increased manufacturing facility construction. According to Truist Securities analyst Keith Hughes, this integration allows CRH to "profit from the entire value chain".
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Rockwell Automation (ROK): Rockwell Automation is identified as a beneficiary in the automation space. Increased domestic manufacturing will require advanced automation technologies to enhance efficiency and productivity, placing companies like Rockwell Automation in a favorable position.
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Eaton (ETN): Eaton is another stock highlighted for its potential to gain from the industrial resurgence. The company's diverse portfolio of power management solutions is crucial for the energy demands of new and expanded manufacturing operations. Eaton's strong historical performance, with shares returning an average of 19% annually over the past decade (six percentage points better than the S&P 500), underscores its resilience and potential.
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GE Vernova (GEV): GE Vernova, focusing on power technologies, is also expected to be a significant beneficiary. The increased demand for power to run new factories will directly benefit GE Vernova. BofA Securities analyst Andrew Obin suggests that despite past challenges for GE, Wall Street is again valuing its power assets significantly, and he sees further upside for Vernova given rising demand, with a Buy rating and a price target of $485, a substantial increase from its recent price. GE Vernova's Ebitda is projected to grow by almost 50% between 2025 and 2026, significantly higher than the approximately 10% expected for industrial companies in the S&P 500.
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Ametek (AME): Ametek is the fifth stock mentioned as one that could benefit from the planned industrial revival. While the specific sector within the industrial landscape isn't detailed as extensively in the provided excerpts as the others, its inclusion suggests it is well-positioned to capitalize on the broader trends of increased manufacturing activity.
It is important to note that while the prospect of re-industrialization presents opportunities, it also comes with potential headwinds, such as policy-induced recessions and the impacts of tariffs. For example, the OECD has previously cut growth forecasts due to President Trump’s trade policies. Furthermore, there are concerns about potential tariffs on goods from countries like Mexico, which could affect manufacturing exports. However, the underlying need to rebuild America's industrial capacity, as highlighted by the increased construction spending, suggests a fundamental shift that these five companies are well-placed to leverage.
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