Table of Contents

Foreword ix

Preface xi

Acknowledgments xv

Part I: Getting Started in Industrials 1

Chapter 1: Industrials Basics 3

Industrials Basics 4

Industrials Characteristics 7

The Modern Production Process 14

Chapter 2: History of Modern Manufacturing 21

The Advancement of Trade and Investment 22

The Rise of Asia and Changes in the Manufacturing Landscape 29

The State of US Manufacturing 41

Chapter 3: Industrials Sector Drivers 47

Corporate Spending 48

Government Spending 59

Part II: Next Steps: Industrials Details 65

Chapter 4: Industrials Sector Breakdown 67

Global Industry Classification Standard (GICS) 67

Global Industrials Benchmarks 69

Capital Goods Industry Group 75

Transportation 85

Commercial & Professional Services 93

Chapter 5: Staying Current: Tracking Sector Fundamentals 97

What to Watch 97

Corporate and Government Spending-Related Metrics 98

Industry Specific Indicators 111

Chapter 6: The Infrastructure Market 117

A Very Big Market 118

Infrastructure Investment Drivers 120

Risks to Infrastructure Growth 123

Participating in the Infrastructure Boom 125

Part III: Thinking Like a Portfolio Manager 131

Chapter 7: The Top-Down Method 133

Investing Is a Science 133

Einstein’s Brain and the Stock Market 134

The Top-Down Method 136

Top-Down Deconstructed 142

Managing Against an Industrials Benchmark 149

Chapter 8: Security Analysis 155

Make Your Selection 156

A Five-Step Process 157

Important Questions to Ask 164

Chapter 9: Allocating your “Capital Good” 171

Strategy 1: Adding Value at the Industry Level 171

Strategy 2: Adding Value at the Security Level 179

Strategy 3: Industrials Sector Downturn 180

How to Implement Your Strategy 180

Appendix: Industrials Websites and Data Sources 183

Notes 185

Glossary 194

About the Authors 197

Index 198

About the Author

MATT SCHRADER is an Industrials analyst for Fisher Investments. He is also a contributing columnist for MarketMinder.com. Matt is a graduate of the University of California, San Diego. Originally from Marin County, California, he currently resides in San Francisco.

ANDREW S. TEUFEL has been with Fisher Investments since 1995 where he currently serves as a Co-President and the Director of Research. Prior to joining Fisher Investments, he worked at Bear Stearns as a corporate finance analyst in its Global Technology Group. Andrew also instructs at many seminars and educational workshops throughout the United States and United Kingdom, and lectures at the Haas School of Business at UC Berkeley. He is also the Editor in Chief of MarketMinder.com. Andrew is a graduate of UC Berkeley.