Stephanie Link: Casting My Eye on Industrials

NEW YORK (TheStreet) -- The industrial stocks are one of my favorite sectors in the S&P 500 and have been over the past several months.

We own quite a few in Action Alerts PLUS, Jim Cramer's Charitable Trust, with our two largest positions being Eaton (ETN) and Johnson Controls (JCI). The industrial sector is one of the most levered to an improving economy and also to higher interest rates.

Over the last few weeks, I've been encouraged to see the pickup in several manufacturing economic data points. The Chicago PMI, the National PMI, ISM, Industrial Production and Capacity Utilization figures have all ticked higher and came in ahead of consensus. Confirming the macro trends, several companies like 3M (MMM), Ingersoll Rand (IR) and Honeywell (HON) at the Bank of America/Merrill Lynch Industrials conference last week said the U.S. was improving (albeit slowly) and what really caught my attention was that March had more than made up for the slow January and February months, which were plagues with unusually cold and wet weather. They stopped short of saying the economy was growing quickly, but they did see an improvement. I think we will continue to see improvement throughout 2014, which is why I want to have exposure via the industrials.

These managements also indicated that Europe was beginning to turn as well and that Asia had stabilized. Within industrials, I've liked the aerospace cycle for several years and the replacement cycle story in autos and trucks, as well as the rental equipment market. For 2014, my favorite end market is the non-residential construction theme, given that it has lagged the residential recovery, which is expected to grow 9% this year and 15% next. Resi almost always leads non-resi spend. 

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