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A Uniquely American Growth Opportunity

Markets got a shot of espresso this morning -- a double shot actually. Both capital goods orders ex-defense and durable goods orders rose more than expected during January, according to data released by the Commerce Department.

Insight & Action

Capital goods represent spending by corporations and durable goods represent spending by individuals. In his latest book "Unleashing the Second American Century," Milken Institute fellow Joel Kurtzman cites cheap energy, educated labor and manufacturing expertise as key drivers over the next decade. Today's better-than-expected results across both sectors speak to Mr. Kurtzman's uniquely American organic growth opportunity. The combination also bodes well for investors who are long. Spending trends have correlated positively over time with stocks.

Insight & Action

The immediate reaction would be to buy stocks on today's better data, or even narrow the focus to an industrial exchange traded fund like the iShares U.S. Industrials ETF (IYJ ). We take this a step further, highlighting the five industrial companies whose sales are forecast to rise the most in 2014, based on consensus estimates tracked by Bloomberg. Presumably, these are the companies best positioned to benefit from higher spending.

Insight & Action

For blog readers willing to consider the slightly smaller mid-cap industrials, we note five additional companies with strong sales forecasts: Packaging Corp. of America (PKG ) at 63 percent, Eagle Materials Inc. (EXP ) at 38 percent, Clarcor Inc. (CLC ) at 26 percent, Granite Construction Inc. (GVA ) at 22 percent and Crane Co. (CR ) at 19 percent.

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