Two recent reports from the Federal Reserve on the manufacturing sector seem to indicate that the economic cycle has bottomed and an expansion is at hand. While some investors might feel they have missed out on the recent market rally in response to this bottoming, not all stocks have shared in this move up.

IN PICTURES: 20 Tools For Building Up Your Portfolio

Economic Report Card #1
The first report was the Empire State Manufacturing Survey, which is a monthly report released by the Federal Reserve Bank of New York. The index of general business conditions had a reading of 12.08 in August, up from a negative number in the previous month. The index of Future Business Conditions came in at 48.22, also up from the previous month.

This survey gets sent to 200 manufacturing executives across the state and is seen as an important guidepost on the strength of the economy.

Economic Report Card #2
The second report was from the Federal Reserve Bank of Philadelphia, which conducts a monthly survey of manufacturers in the Third Federal Reserve District. This district covers Delaware, Eastern Pennsylvania and Southern New Jersey. The diffusion index of current activity, which is the broadest measure of economic activity in the survey, increased from -7.5 in July to 4.2 in August.

Other indexes in this survey also surged higher. The current new orders index also hit 4.2, up from -2.2 the previous month, and the current shipments index increased 10 points. Both the New York and Philadelphia indexes were at the highest levels since November 2007.

One thing that should be noted about these two surveys is that they are restricted geographically to a small part of the Northeast, which might limit its usefulness when applying its conclusions nationally. Although many industrial names have had huge upside moves, there are still several others that are down year to date that might provide an opportunity for intrepid investors.

Stocks Yet To Recover

  1. Vulcan Materials Company (NYSE:VMC) and Martin Marietta Materials (NYSE:MLM) are both down year to date, although both up significantly off the March 2009 lows. Both these companies make aggregates and other materials for the construction industry.

    During its recent quarter, Vulcan Materials said that the sales price for aggregates was up 3% over the same quarter of last year. Martin Marietta Materials saw a 4% price increase in its quarter.

  2. Stericycle Inc. (Nasdaq:SRCL) is in the garbage business, but in the niche line of medical waste. The stock is down 25% from its 52-week high, and just reported second-quarter profits up 17.5% from the same quarter in 2008.

  3. Emerson Electric (NYSE:EMR) is a manufacturer of various electrical components for a variety of industries, and is also off 25% from its 52-week high. The company reported flat sales but $800 million in free cash flow in its third fiscal quarter.

The Bottom Line
The market has moved sharply as investors discount the upcoming economic expansion. However, there are opportunities out there for sharp-eyed stock pickers who want to participate in the next move up. (To learn more, see our Economic Indicators Tutorial.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  3. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  4. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  5. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Trading Center