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In Last Quarter Of Year, A Focus On What's Working


NEW YORK (AP) â¿¿ It's a question as old as investing itself: will good performance last?

The Dow Jones industrial average and the Standard & Poor's 500 index are both up more than 5 percent this year, and barring something dramatic will finish in the black. Much of the gains can be attributed to two sectors: companies that make equipment used in big construction projects, and hotels, restaurants and ritzy clothing stores. Each is up more than 15 percent for the year.

Some stocks in the group are up much more. Anyone who invested in engine-maker Cummins Inc. in early January watched the investment grow by 100 percent. Inc. has jumped about 60 percent.

Normally, performance like that would be a red flag. Chasing after past performance is an investing sin that, like dunking your potato chip twice in dip, everyone is guilty of occasionally. But some money managers say that this could be one time when it pays to keep investing in stocks that are outperforming the market.

The reasons: Much of the world is on a building binge. And consumers with good jobs are starting to spend money again.

Industrial companies are profiting from massive infrastructure spending in emerging markets such as China, Brazil and India. As each country builds roads, tunnels, schools and malls to cater to a growing middle class, they often turn to American corporations for machines, trucks and airplanes.

"The performance of the industrial sector is really a vote of confidence in our ability to export quality products around the world," said Nick Calamos, president of investments at Calamos Asset Management Inc.

Cummins, for example, saw sales of construction equipment more than double in the second quarter, mainly because of building projects in China. Caterpillar has expanded its operations in Brazil and China this year in anticipation of continuing growth.

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