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Prediction: EV Stocks Will Be Your Best Investment in 2026. Here's Why. | The Motley Fool

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  Published in Stocks and Investing on Saturday, November 8th 2025 at 18:38 GMT by The Motley Fool
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Prediction: Industry Companies Will Be My Best Investments

In a recent column on The Motley Fool titled “Prediction: Industry Companies Will Be My Best Investments,” the author lays out a compelling case for why industrial firms are poised to outperform the broader market in the near term. The piece blends macro‑economic trends, fiscal stimulus expectations, and sector‑specific catalysts to build a bullish thesis that industrials—spanning manufacturing, transportation, and infrastructure—will deliver superior returns for savvy investors.

1. The Macro Backdrop

The article opens by noting that the U.S. economy is emerging from a period of heightened uncertainty. Inflationary pressures have eased somewhat, but interest rates remain elevated as the Federal Reserve works to temper the price level. While the tech sector continues to grapple with a high‑growth, low‑margin model, the industrial sector appears to be riding a different wave.

Key points highlighted:

• Supply‑chain resilience – After the pandemic‑era disruptions, many industrial companies have re‑balanced inventory strategies, reducing reliance on a single global hub and mitigating risks of raw‑material shortages.
• Energy transition – As the industry moves toward cleaner power, opportunities abound for firms that can deliver energy‑efficient equipment, electric vehicle components, and renewable‑energy infrastructure.
• Geopolitical tailwinds – Tensions in the Middle East and around the Asia‑Pacific region are nudging defense budgets upward, a boon for aerospace and defense manufacturers.

The author emphasizes that these macro factors are setting the stage for a “cyclical rebound” in the industrials that investors may have missed.

2. Infrastructure: The Driving Force

A central pillar of the thesis is the forthcoming U.S. infrastructure bill. The piece outlines how the bill—estimated to cost $1.5 trillion over the next decade—will create a cascade of demand for a wide array of industrial products and services. The author breaks down the bill’s impact into several sub‑sectors:

The article cites specific companies that stand to benefit from each sub‑sector, including Caterpillar, Union Pacific, and Siemens Energy. The author points out that even if the bill’s pace slows, the sheer scale of the initiative ensures sustained demand for industrial goods.

3. Defense & Aerospace: A Growing Bull

The author dedicates a substantial portion of the piece to defense spending. With an ongoing focus on technology upgrades, modernizing fleets, and strengthening deterrence in contested regions, defense firms enjoy a long‑term growth trajectory that is less sensitive to consumer sentiment.

Key defense picks identified:

• Lockheed Martin – Known for its high‑margin aircraft and missile systems, the company benefits from steady contracts with the U.S. and allied nations.
• Raytheon Technologies – A diversified portfolio spanning aerospace, cybersecurity, and advanced sensors.
• Boeing – Despite a few recent setbacks, Boeing remains a key player in the commercial and defense aviation market, especially with new, fuel‑efficient jet programs.

The article also references an Investor Intelligence piece that examines defense contractors’ revenue trends, noting a 4% year‑over‑year growth that outpaces the broader S&P 500.

4. Manufacturing & Innovation: The Mid‑Cycle Star

Mid‑cycle industrials—companies that operate in sectors like industrial manufacturing, heavy equipment, and process technology—are highlighted as potential “hidden gems.” The author points out that these firms often have higher operating margins than consumer staples, providing a cushion against downturns.

Notable names in this category include:

• BASF – A global chemical manufacturer that’s positioning itself to supply the energy transition with advanced materials.
• Honeywell International – Offers aerospace parts, automation solutions, and safety equipment that see consistent demand.
• Caterpillar – The heavy‑equipment giant benefits from infrastructure spending and a steady global construction cycle.

The piece underscores that many of these companies have strong balance sheets and robust dividend yields, making them attractive for both growth and income portfolios.

5. ETFs & Investment Vehicles

For investors who prefer diversified exposure, the author recommends a few sector‑specific ETFs:

• Industrial Select Sector SPDR Fund (XLI) – Offers broad exposure to industrial giants, with a current 20‑year total return that outpaces the S&P 500.
• iShares U.S. Industrials ETF (IYJ) – Focuses on U.S. industrial companies, providing a more concentrated bet on domestic infrastructure growth.
• SPDR S&P 500 Utilities ETF (XLU) – While not purely industrial, it captures some energy‑transition upside through utilities’ involvement in grid modernization.

The article compares the expense ratios, sector weights, and historical performance of these funds, noting that XLI carries a slightly higher expense ratio but a more diversified portfolio.

6. Risks & Caveats

No bullish thesis is complete without a candid assessment of risks. The author lists several potential headwinds:

• Interest‑rate hikes – Prolonged tightening could dampen capital expenditures for infrastructure projects, slowing growth for industrial manufacturers.
• Geopolitical conflicts – Escalating tensions could disrupt supply chains and increase raw‑material costs.
• Technological disruption – Rapid advances in automation or materials science could render certain industrial products obsolete.
• Environmental regulations – Stricter carbon‑emission rules may increase compliance costs for large manufacturers.

The author suggests a balanced approach: allocating 30–40% of an active portfolio to industrials while maintaining exposure to more defensive sectors like utilities and consumer staples to hedge against volatility.

7. Takeaway: A Strategic Bet on Industrials

In conclusion, the article presents a compelling argument that industrial companies—driven by infrastructure spending, defense budgets, and the energy transition—are positioned to outperform the broader market. By carefully selecting both individual stocks and sector ETFs, investors can harness the upside while mitigating downside risks.

For readers who want to dig deeper, the piece links to several supplementary articles: a Wall Street Journal analysis of the infrastructure bill’s economic impact, a Bloomberg feature on the rising demand for electric‑vehicle components, and a Reuters report on global defense spending trends. These links provide additional data points and context that bolster the bullish thesis.

Ultimately, the author recommends monitoring the political climate around infrastructure legislation, keeping an eye on defense contracts, and staying attuned to innovations in manufacturing technology. Those who adopt a disciplined, research‑driven approach to industrials may find that this sector offers a robust growth engine amid a volatile economic landscape.