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US Strategy Comment: Identifying Opportunities Within Materials and Industrials



Despite Our Sector Recommendations, Ideas Still Exist Within the Materials and Industrials Sectors for Active Investors

Materials and Industrials have been two of the best-performing sectors in the S&P 500 over the past three months. Despite this recent price strength, however, we believe our macro and fundamental work continues to support our Market Weight and Underweight recommendations, respectively. With that said, these overall sector recommendations should not necessarily be interpreted as indifference or reluctance to add exposure to specific areas that we find attractive in these groups. In fact, we do believe that opportunities exist within Materials and Industrials, especially for more active investors. Therefore, in this report, we highlight potential areas of opportunity within Materials and Industrials across the market capitalization spectrum and also highlight stocks exhibiting value, growth at a reasonable price, and growth attributes as we know that different types of stocks can appeal to different types of investors.

Main Points

  • Materials Sector Growth and Valuation Are Largely in Line With Overall Market

    • Small-Cap Chemicals Industry Offering Higher Earnings Growth at a Discounted P/E Relative to Its Large-Cap Counterpart

    • Mid-Cap Containers & Packaging Could Be a Beneficial Way for Investors to Add Materials Exposure

    • Grouping Materials Sector Stocks Into Value/GARP/Growth

  • Still Underweight Industrials

    • Mid-Cap Commercial Services & Supplies Looks Favorably Positioned Within Industrials Especially Relative to Its Large-Cap Counterpart

    • Small-Cap Building Products Could Be a Value Proposition

    • Grouping Industrials Sector Stocks Into Value/GARP/Growth

  • Stocks in Materials and Industrials Sectors That Fit the Theme


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Brian Belski Chief Investment Strategist

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