Daily Gains Letter

The Old Economy’s Back Big-Time

By for Daily Gains Letter | Jan 28, 2013

DL_Mitchell_280113There is a renaissance taking place in the U.S. economy and the stock market. There aren’t a lot of headlines about it because technology stocks like Apple Inc. (NASDAQ/AAPL) get all the news. What we’re seeing is a major resurgence in what I call “old economy” businesses. These are traditional brick-and-mortar companies that make everything from nuts and bolts to deodorant and soap. For a lot of these old economy companies, business is really good these days. And that can be a great thing for your investment portfolio.

By old economy, I’m referring to non-pure-play technology companies. These are established businesses like The Procter & Gamble Company (NYSE/PG), Precision Castparts Corp. (NYSE/PCP) and Deere & Company (NYSE/DE), for example—businesses that have been around a long time and make the products we use every day. The old economy is back and with a vengeance.

Consider, for example, an old economy trucking company like J.B. Hunt Transport Services, Inc. (NASDAQ/JBHT). On the stock market, this traditional, perhaps unexciting business has been a powerhouse wealth creator for investors.

A lot of investors are lulled into thinking that you can’t do as well owning an old economy company, as compared, say, to a well-known technology stock. But J.B. Hunt proves otherwise. The company just reported an outstanding fourth quarter and year-end 2012. For both periods, the company generated record revenues, record earnings, and record earnings per share. Not bad for an old economy business. On the stock market, a mature trucking company is beating the pants off of Intel Corporation (NASDAQ/INTC). This is actually great news for the U.S. economy.

And there are countless old economy companies doing well on the stock market, significantly outperforming the companies that make the daily headlines. The list goes on and on from oil and gas, to auto parts, to toothpaste, to retailers, to railroads. Now, not all companies within specific industries are doing as well as others. But the winners stand out and I think they are going to stay winners as the U.S. economy gets stronger.

Nothing gets more old economy than the distribution of gases used for welding and construction. Consider Airgas, Inc. (NYSE/ARG) out of Radnor, PA. This is a $7.0-billion company that pays dividends. It sells propane, oxygen, nitrogen and a lot of other gases used for industrial and medical use. That’s pretty old economy if you ask me. On the stock market, this company has been a powerhouse well creator. It’s been going virtually straight up on the stock market for the last 10 years.

The old economy is back and it has a lot more room to run. Today, you really have to look beyond what you hear about the stock market. Companies like Apple and Google Inc. (NASDAQ/GOOG) get all the headlines, but there are so many other great opportunities in the marketplace that you might not be considering when it comes to your portfolio.

Today, stability and consistency are attractive attributes in stock market investments. The volatility has been extreme over the last 15 years. Old economy stories are going to continue to be successful going forward and companies like J.B. Hunt and Airgas prove that you can do great on the stock market without chasing the headlines. There are plenty more great old economy opportunities out there; the list of great names is actually quite long.

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