If you're wondering how to find the best industrial stocks, there's good news and bad news. The bad news is that, like so many parts of Wall Street, the industrial sector doesn't have a magic metric that readily separates good stocks from bad stocks. On the bright side, with a little bit of know-how and some discipline, investors can find the industrial stocks that are more likely to succeed.
Industrial stocks typically represent companies that handle production and distribution. Their businesses are straightforward – they manufacture goods, for instance – but their balance sheets are usually more complicated than what you'd find with early stage tech start-ups. Industrial stocks also hold material assets like assembly plants, real estate and heavy equipment and machinery, and they sometimes have large workforces. All to say: industrial stocks involve capital-intensive ventures.
These cost centers make it harder to find the breakneck growth or huge profit margins you might find at a software start-up or a biotech company researching the next generation of cancer drugs. But, because companies classified as industrial stocks require more staff and more raw materials than just a few computers in an R&D department, it's harder for new competition to disrupt them given the massive up-front investment required to establish a business in the space.
