Rockwell (ROK) is a pretty well-loved industrial, and particularly when recovery themes take over (as has been the case for a few months). While industrials with short-cycle exposure like Parker-Hannifin (PH) can, perhaps paradoxically, see momentum fade when ISM moves back above 50, Rockwell’s past rallies tend to last a little longer. Add in investor expectations that Rockwell will benefit from a meaningful reshoring trend, and I can’t say I’m surprised that Rockwell shares have stayed pretty strong since my last update.
Valuation is a frequent issue for me with Rockwell. Even though I think quality companies deserve premiums (and Rockwell qualifies), settling for less doesn’t always work well in my experience. On the other hand, with interest rates likely to remain low for a while, maybe investors have to accept that 7% returns are the “new 10%” return and adjust expectations accordingly. Even so, compared to names like Dover (DOV), Honeywell (HON), and Lincoln Electric (LECO), Rockwell screens as relatively more expensive.
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