These days, while most of the business media attention is centered around the precious metals and technology sectors, there are other market niches that are looking attractive. The capital goods sector is one of them. In fact, this group may be one of the least sexy and most often overlooked corners of the investment universe, mostly because many folks aren't sure of what's included under the capital goods title. In a nutshell, the sector is comprised of companies doing business in aerospace and defense, construction, industrial machinery, and engineering and building products.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Below we highlight three capital goods producers that have recently been flashing very strong fundamentals. From the aspect of dividend yield, P/E ratio, price to book and price to sales ratios, this trio leads the pack.

Irish Tumbler
CRH PLC (NYSE:CRH) is headquartered in Dublin, Ireland and operates a diversified building materials business. CRH stock has fallen significantly this year, down more than 35% since New Year's. That compares very poorly with the rest of the sector as represented by the Vanguard Industrials ETF (NYSE:VIS), which is up nearly 17% YTD and the broad market, as represented by the SPDR Dow Jones Industrial Average ETF (NYSE:DIA). In late August, the company was hit by a downgrade from Merrill Lynch, from a buy rating to neutral.

Nonetheless, CRH may now be the ideal choice for value investors should the global growth story continue or we see more infrastructure stimulus programs in the face of stagnant growth. CRH trades with a dividend yield of 2.7 % and sports a P/E of 16.6. The price to book on the stock is 0.87 and price to sales 0.54, both attractive value numbers.

Steel Rail Value
Harsco Corporation (NYSE:HSC) is a diversified provider of engineered products and industrial services, best known for its manufacture of products for the rail industry. Year to date, the company's shares are also down 28%. But like CRH, the fundamentals indicate a potential turnaround play. P/E on HSC is 18.5 and the yield is 3.5%. price to book and price to sales are 1.24 and 0.61 respectively.

War Profiteer
Northrop Grumman Corporation (NYSE:NOC) is a security-based business involved in producing everything from submarines and aircrafts to satellites and electronic intelligence systems. The company's stock has performed well YTD, up 15.5%. The shares yield slightly less than 3% and trade with a multiple of 10 times last year's earnings. (High-dividend stocks make excellent bear market investments, but the payouts aren't a sure thing. Check out Dividend Yield For The Downturn.)

NOC has very competitive P/B and P/S valuations, as well, the former coming in at 1.40 while the latter sits at 0.54.

The Wrap
The capital goods sector won't be manufacturing anything you find at the mall, but investors should be aware of the potential for these stocks to fly should the current stagnant economic situation begin to ease.

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

Related Articles
  1. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  2. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  3. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  9. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  10. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!