North American Industrials

Where top-down tailwinds meet bottom-up opportunities

• Aligned Macro Tailwinds: After decades of stagnation, US manufacturing is on the cusp of a resurgence.

  • US policy has pivoted, actively fueling the renaissance of domestic production. This shift is propelled by societal rifts stemming from the loss of manufacturing jobs, coupled with mounting geopolitical tensions.

  • Corporations have awakened to the harsh reality of overextended supply chains and the need for domestic production pipelines.

  • The conversion of current production goals towards net zero carbon emissions implies a massive increase in investment.

• Improved Competitive Landscape: The Industrials sector has shifted to a high-value-added sector with a favorable competitive structure.

  • ROE has risen from 13% in the early 2000s to the current 19%.

  • Over the past 10 years, the sector’s ROE consistently exceeded that of the S&P 500 by more than 400 basis points.

• Prime Beneficiary of Technology

  • Key technologies such as IoT, smart sensors, AI, and robotics have become more available and cheaper.

  • This transformative trend means greater operating efficiencies and higher price points through higher value-added products for manufacturing companies.

• Misunderstood and Neglected

  • The multi-decade headwinds faced by the industrials sector have resulted in investors overwhelmingly focused on tech and consumer-facing companies at the expense of companies that make things.

  • Consequently, there are an unusually large number of quality companies trading at significant discounts to intrinsic value.