United Technologies (UTX)

An excellent company. It has some ties to the US economy. If it pulls back, it could be a good opportunity to add to your position.

Does United Tech's recent pullback provide a buying opportunity? It is a risky market right now. He believes that it is best to look at the relative strength of the sector. Looking at market leadership. Industrials for the past year have been underperforming the market. They have been invested in UTX in the past. You have a good theme. They have non-res. construction, aerospace leverage, good industry, very cyclical, but good. It is well run. Moderate expectation on the top line, but great capital return. Feels that there are better places to be in the market though.

(Top Pick Aug 19/14, Down 7.68%) It has lagged partially because of FX. Otis has a large presence in China and it has been a difficult market with the demand weakening and they have seen price competition there. It is a well managed, diversified, multinational company.

Lockheed Martin (LMT-N) or United Technology (UTX-N). This is really about defence aerospace versus other industrial technology based companies. He would probably have a preference for this company, primarily because the defence world is really a tough one to figure out. The risk of either winning or losing a program is quite high, which is going to put a damper on any kind of multiple expansion on defence companies.

(A Top Pick July 8/14. Down 0.39%.) A high quality industrial company and she still likes it. They are capturing 2 trends, massive renovations in emerging markets, through their building products including the elevators, Carrier, Chubb for security and also capturing travel through their aerospace division. New management is focusing on what they want to invest in.

There are worries about the effect of the US dollar on exports. He is bullish on US industrials in general so you might see this as a buying opportunity. If there is a good dip it might be time to buy it.

(Top Pick Jun 3/14, Down 1.08%) It is flat in an otherwise decent market. Earnings are about 23% lower than two years ago. They will sell or spin off their troubled helicopter business. Historically a great return on equity but now it is a low return on investment and with a new CEO.

A high-quality global industrial company. Really focused on building systems, so they’ve got HVAC through Carrier, airplane engines through Pratt & Whitney and Otis elevators. This participates in 2 megatrends. Urbanization through their building services and the growth in travel through aviation. About 40% of their business comes from aftermarket giving a more stable, reoccurring revenue stream. Dividend yield of 2.2%.

A very well diversified company. They have their aerospace side where they’ve had a few missteps over the last couple of years and had to go back to the drawing board. Have also had a little bit of trouble internationally. They own Otis and Carrier which are tied to residential and commercial buildings. They’ve also had trouble in China which has slowed down. There had also been management problems. When he saw the changes that were being made, he felt that he would stay with the company, thinking that the market might build back in some of that multiple spread that was lacking. That is exactly what happened. At this point it is probably fairly fully priced. However, they are starting to gain some traction in their technologies.

This is a behemoth. They are in elevators, helicopters, etc., etc. If you have the ability to buy and hold through a cycle, you should do okay with this. It is a high class industrial cyclical. If you want to make money in industrial cyclicals, you have to buy them when they are cheap. At this point in the cycle we are starting to see some currency impact from global operations, and this will hurt this company. If you Buy and Hold on a 10 year basis, you should be okay. If you have a shorter term view, this may be the time to take some money off the table. Thinks it is a very lofty here. A better way would be to play the pure play.

(A Top Pick April 2/14. Down .01%.)

A very high quality industrial company without any real energy exposure. Very big presence in China, which is slowly starting to improve. Likes their exposure to non-residential construction. Consistent dividend grower and trading at a reasonable multiple. Geographically diversified with a stable earnings stream. She would wait on a down day and pick it up a couple of percentage points lower.

(A Top Pick Jan 29/14. Up 2.37%.) Had a kind of tough 2014, which led to their CEO being asked to resign. This is a good quality industrial franchise. They have Otis, Carrier, Lennox, Pratt & Whitney as well as Goodrich. Trading at a discount to its peer group, and rightly so. It has to execute and he is watching it. If it doesn’t, he will.

A broad industrial. In the aerospace industry through Goodrich, which they bought 2-3 years ago. They own Pratt and Whitney and Sikorsky Helicopter. On the industrial side, they own Otis elevators and Lennox. This year hasn’t been great for them. Their CEO abruptly resigned. The other thing is China growth, which is causing him to look at this a little more closely. China is a big market for Otis and Lennox, and he is looking carefully to see if that growth is slowing and likely to continue to slow. A good core holding, but not a screaming buy.

Has been looking at US heavy metal, and this is a diversified heavy industrial company. Traditionally, a lot of their business comes from capital expenditures by big companies. Since the recession in 2007, capital expenditures by major US companies has been very muted, because factories have been under capacity and there hasn’t been a great need to spend a lot of money. He is starting to see a change. As the US economy accelerates, which is what we are seeing, and as employment expands, he is starting to see more CapX, which is very positive for this company. Maybe it’s not a bad time to start thinking about getting back in.