A Tough Year for Industrials

Joel Anderson |

XLI, CLH, MDR, AVY, FAST, FSLR, industrials, solar, Warren Buffett, This has been a year to forget for the most part in the industrial sector. Like most of the economy, the sector suffered a collective swoon in early August while congress argued over the debt ceiling and American credit was downgraded. However, like most equities, the sector has been staging a relative rally ever since, regaining ground it lost during the August sell-off.

Overview

The sector as a whole appears to be slightly off this year. One good way to track the progress of the sector would be through its most popular ETF, the Industrial Select Sector SPDR Fund (XLI), which tracks the S&P Select Sector Industrial Index. This fund is down almost 2.25 percent on the year, recovering in the last two months after reaching a year-to-date low in early October of $27.68 a share, down over 20 percent.

Big Gainers

Clean Harbors, Inc. (CLH)- This provider of environmental, energy, and industrial services has over 50,000 customers ranging from Fortune 500 companies to municipalities. Much of its work comes from  hazardous material management services. Clean Harbors had an excellent 2011, with its share prices shooting up over 50 percent after the company turned in several strong earnings reports and revised its 2011 guidance higher on two occasion. Clean Harbors also acquired Peak Energy Services Ltd. in 2011.

Fastenal Company (FAST) - This maker of industrial and construction supplies was in the midst of  ho-hum 2011, showing some ups and downs, until September when the stock started to take off. On the year, Fastenal is now up over 45 percent and continues to climb. Fastenal managed to buck the perception that construction and manufacturing were dead by posting solid earnings and sales numbers for its Q3.

Big Losers

McDermott International (MDR) - McDermott International, which designs and executes complex offshore drilling projects worldwide, was a very active participant in the early august stock swoon, and it's only continued the decline since. A poor earnings report in early November helped little, and McDermott appears headed to a more than 45 percent drop for the year.

Avery Dennison Corporation (AVY) - Avery Dennison develops identification and decorative solutions, including labeling technology and pressure sensitive materials. The company began its tumble in earnest in mid-July when the company announced that it was revising its 2011 guidance lower, and continued the fall in late October when it announced that profits had slipped in its 2011 Q3. On the whole, Avery has now fallen over 30 percent for the year.

Biggest Story?

While still a relatively small portion of the sector, solar panel manufacturing proved to be one of the industries getting the most coverage in 2011. A glut of cheap solar panels coming from manufacturers in China meant major slips for the biggest American panel-makers, including First Solar (FSLR), which is off more than 70 percent on the year. The year also included the Solyndra bankruptcy, a trade commission investigation into Chinese trade practices, Warren Buffett buying up a solar plant in California, and First Solar dramatically altering its business model. Next year doesn't look to be any less eventful for the segment, as experts are predicting a spate of bankruptcies that will separate the wheat from the chafe, killing off smaller companies and gleaning out those most likely to survive in the long term.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
JMXXL JPMORGAN CHASE & CO D/S T n/a n/a n/a 0
FAST Fastenal Company 49.13 -0.04 -0.08 2,787,351
MDR McDermott International Inc. 7.72 0.25 3.35 4,627,168
CLH Clean Harbors Inc. 55.22 0.33 0.60 314,396
FSLR First Solar Inc. 33.17 -0.42 -1.25 2,275,290
AVY Avery Dennison Corporation 73.68 0.37 0.50 755,111

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