Let’s face it—September is not the most exciting month for the capital markets. The third quarter is closing, and Q4 earnings are still days away. As a result, volumes tend to be lower than usual in September. This can make it an ideal time for investors looking to accumulate long positions without creating too much risk. So how can you take advantage of this environment? By focusing on companies that have strong balance sheets and are poised to benefit from tailwinds at a time when few other stocks do. Below we outline four Machinery stocks you should buy in September if you’re interested in adding them to your portfolio.
Gates Industrial (GTES)
We recommend buying Gates Industrial (GTES) as one of the best machinery stocks in September. The company has grown its core business (industrial products) by 13%, compounded annually since 2013 and 4% in the past two years. Gates has achieved this through acquisitions, manufacturing expansion, and organic growth from core products like gas turbines. This is the third consecutive year the stock has outperformed the market, and we like the upward trajectory that the stock looks set to customers. In addition, gates are expected to deliver 16% earnings per share (EPS) growth in 2019, marking a significant improvement over the 12% earnings growth the company was born in 2018.
SPX Technologies (SPXC)
We believe that SPX Technologies (SPXC) is an excellent machinery stock to buy in September because of its strong end markets, ample cash flow, and strong balance sheet. SPX has invested heavily in research and development to maintain its leading edge in innovation. The company’s technology focuses on the oil, gas, and medical gas industries. The company has been in acquisition mode over the past few years, making strategic purchases to expand its product offerings and geographic footprint.SPX has delivered 8% revenue growth compounded annually since 2013 and expects revenue to increase by 9% in 2019. Unfortunately for SPX shareholders, the stock has underperformed in its sector. We think now is an excellent time to buy SPX before the rest of the market catches onto the company’s strong growth outlook.
We believe that Parker-Hannifin (PH) is a good machinery stock to buy in September because of its leadership position in the aerospace and defense industries and its industry-leading margins. Parker has a strong track record of delivering double-digit revenue growth and has been a consistent outperformance in the machinery sector. The company has also been a strong cash flow generator. However, the stock has underperformed its industry over the past three years due to investor concern around China’s retaliation against U.S. tariffs on goods. Parker has a strong presence in China and benefits from producing most of its interests in the U.S. However, investors have been slow to react to these tailwinds, and we think the stock is worth buying.
Energy Recovery (ERII)
Finally, we recommend that investors consider buying Energy Recovery (ERII) as an excellent machinery stock in September due to its exposure to the industrial and healthcare markets and its competitive advantage in the waste-to-energy (WTE) segment. Energy Recovery is a leader in energy from waste and is dominant in the healthcare, industrial, and power generation sectors. The company’s waste-to-energy solutions convert waste into fuel for various industries. The stock has underperformed its sector over the past three years, and we think these are attractive entry points for investors. In addition, we expect strong revenue growth (7% compounded annually since 2013) – especially in its industrial segment, which has grown faster than the company’s healthcare segment.
We believe these are the four best machinery stocks to buy in September. These stocks are poised to benefit from solid end markets, ample cash flow, and strong balance sheets. In addition, they have all underperformed in the market in recent years, and we think now is a good time for investors to buy these stocks before the rest of the market catches on to their strong growth outlook.