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

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  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 >>
Trading Center