The industrial sector has been up 10.83% since the beginning of the year, according to Morningstar’s sector returns. And as the economy picks up momentum, the performance of stocks related to homebuilding, construction, and manufacturing have the potential to improve.
The All-In-One-Screener can be used to find which industrial stocks the gurus are betting on in this sector. In the Fundamentals tab, select all industrial related stocks in the industry selection menu. Then, in the Gurus tab, click the checkbox for “Involved in Buy/Sell Activities” and select “5+ gurus” in the Recent Guru Buying/Adding field. For the time frame, select “Over the past 6 months”.
The following are the five most bought industrial stocks among the gurus during the first quarter.
General Electric (GE, Financial)
Steven Romick (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) added GE as a new holding in their portfolios during the first quarter, while 12 others gurus including Bill Nygren (Trades, Portfolio) and David Dreman (Trades, Portfolio) added to their existing holdings.
GE’s stock price has declined marginally by 3% over the past year, closing at $26.46 on July 6. The forward P/E ratio is 16.5, and the P/S ratio is 1.82. Over the past five years, GE’s revenue increased 0.2%, while EBITDA declined by 1.2%. In 2014, EBITDA per share was $3.56.
Following steep declines in net income from 2008 to 2010, GE’s income has steadily increased in the years since. Income in 2014 was $15,223 million, up from $13,057 million the year before.
The current dividend yield is 3.47%, which is close to the three-year high. The payout ratio is a high 741% due to a large net loss in the first quarter.
Union Pacific Corp (UNP, Financial)
Jim Simons (Trades, Portfolio), Ray Dalio (Trades, Portfolio), and Lee Ainslie (Trades, Portfolio) each initiated a new position in Union Pacific during the first quarter. Seven other gurus increased their existing holdings. PRIMECAP Management (Trades, Portfolio) is the largest current shareholder with 0.53% of shares outstanding.
The railroad company’s stock declined 5% in the past year and closed at $96.44 on July 6. The current P/E ratio is 16.34 and the P/S ratio is 3.57. GuruFocus rates Union Pacific’s business predictability as an excellent 4.5 out of 5 stars. The DCF calculator estimates a fair value of $167.11, meaning the stock has a 42% margin of safety.
Revenue has grown steadily over time by 13.1% in the last five years. EBITDA, too, grew by 18.4% over the same time period. Last year, Union Pacific reported EBITDA per share of $11.99, up from $10.04 in 2013.
The current dividend yield is 2.18%, which is close to the five-year high, and the payout ratio is 34%.
Delta Air Lines (DAL, Financial)
Sarah Ketterer (Trades, Portfolio), John Burbank (Trades, Portfolio), and Lee Ainslie (Trades, Portfolio) each purchased a new holding in Delta Air Lines during the first quarter. Eleven more gurus increased their holdings in the airline during the quarter. PRIMECAP Management (Trades, Portfolio) is the largest shareholder with 2.31% of shares outstanding.
The stock rose 10% over the past year, closing at $40.48 on July 6. The current P/E ratio is 29.06, and the P/S ratio is 0.83.
Revenue grew by 6.5% over the last five years, while EBITDA grew by 29.8%. Net income in 2014 was $659 million, a drastic decline from $10,540 million the year before.
Looking at the balance sheet, Delta’s current ratio is less than 1, indicating the company cannot cover its short-term obligations.
The dividend yield is 0.89%, while the payout ratio is 23%.
Precision Castparts Corp (PCP, Financial)
Six gurus including Lou Simpson (Trades, Portfolio) and Bill Nygren (Trades, Portfolio) initiated new positions in Precision Castparts during Q1. Eight others upped their stakes in the company. The largest guru shareholder is Warren Buffett (Trades, Portfolio) with 3.04% of shares outstanding.
The company manufactures complex metal components as well as investment castings and forgings for general industrial, armament, medical and other applications. The stock declined 23% over the last year and closed at $195.66 on July 6. The P/E ratio is 18.33, while the P/S ratio is 2.8.
The revenue growth rate over the past five years was 13.2%, and EBITDA grew by 15%. EBITDA per share has been growing consistently each year, recording at $20.44 in 2014.
Though free cash flow declined slightly in 2014, the figure has increased more than 12% in the last five years. Last year, the company reported free cash flow of $1,247 million.
Honeywell International (HON, Financial)
Paul Tudor Jones (Trades, Portfolio) was the only guru to add Honeywell as a new holding during Q1. Six other gurus including Jeremy Grantham (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) increased their stakes during the quarter. James Barrow (Trades, Portfolio) is the largest shareholder with 1.64% of shares outstanding.
Honeywell is a diversified technology company with products such as control, sensing and security technologies for businesses and homes. The stock price increased 8% over the last year, closing at $102.06 on July 7. The company’s P/E ratio is 18.78 and the P/S ratio is 2.04.
Over the past five years, revenue grew by 4.6%, and EBITDA grew by 15.6%. In 2014, EBITDA per share was $8.88, up from $8.44 the year before.
Honeywell’s dividend yield is 1.97%, which is close to the five-year low. The payout ratio is 35%.
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