Machinery Stocks Offer Value But Be Selective

Machinery stocks are cheap, but investors need to be careful which stocks they pick to play he sector’s recovery that’s according to Jefferies’ 2016 Machinery Bible research report.

There’s been plenty of negative data that’s weighed on the machinery sector in recent months, pushing valuations down to cycle lows across the industry. Jefferies attributes most of the negative data, that’s emerged and weighed on the sector over the past few months, to inventory correction in both consumer and industrial machinery markets. 

Assuming there’s no global recession (this is Jefferies’ belief), analysis suggests that pent-up replacement demand in non-commodity machinery markets can drive another leg to the cycle once inventories are normalized. In other words,...