Chris Semenuk

The US needs a mammoth amount of high-voltage transmission reinvestment because the grid is outdated. Quanta Services is virtually the only contractor with its own skilled labor force for high-voltage projects, and American Electric Power has built 85–90% of the nation's high-voltage lines. Both are poised to win huge contracts.

After a three-year manufacturing recession and the longest ISM PMI contraction on record, US manufacturing has just entered recovery. The destocking headwind is over, tariffs are now manageable, and interest rates are likely to move lower. This creates a powerful cyclical upswing for short-cycle industrial equipment companies that supply the inside of factories—ball bearings, pneumatics, pumps, filters, fasteners, and automation. These businesses have used the downturn to become leaner and are trading on trough earnings and trough multiples, while secular reshoring provides an additional demand tailwind. The opportunity is in basic US industrial champions that have been off the radar for years.

Caterpillar is now firing on all three cylinders—construction equipment, resource industries, and power/energy—for the first time in years. With manufacturing recovery driving all divisions, Caterpillar could double its earnings from roughly $20 per share today to $40 by 2029, underpinned by well-managed operations and a strong service network.

Eaton is the largest maker of electrical equipment, covering everything from the grid down to the chip inside a data center. Its data center equipment sales grew 240% last quarter, and it provides a one-stop shop for electrification without the high valuation risk of merchant utilities.

After a three-year manufacturing recession and the longest ISM PMI contraction on record, US manufacturing has just entered recovery. The destocking headwind is over, tariffs are now manageable, and interest rates are likely to move lower. This creates a powerful cyclical upswing for short-cycle industrial equipment companies that supply the inside of factories—ball bearings, pneumatics, pumps, filters, fasteners, and automation. These businesses have used the downturn to become leaner and are trading on trough earnings and trough multiples, while secular reshoring provides an additional demand tailwind. The opportunity is in basic US industrial champions that have been off the radar for years.

After a three-year manufacturing recession and the longest ISM PMI contraction on record, US manufacturing has just entered recovery. The destocking headwind is over, tariffs are now manageable, and interest rates are likely to move lower. This creates a powerful cyclical upswing for short-cycle industrial equipment companies that supply the inside of factories—ball bearings, pneumatics, pumps, filters, fasteners, and automation. These businesses have used the downturn to become leaner and are trading on trough earnings and trough multiples, while secular reshoring provides an additional demand tailwind. The opportunity is in basic US industrial champions that have been off the radar for years.

After a three-year manufacturing recession and the longest ISM PMI contraction on record, US manufacturing has just entered recovery. The destocking headwind is over, tariffs are now manageable, and interest rates are likely to move lower. This creates a powerful cyclical upswing for short-cycle industrial equipment companies that supply the inside of factories—ball bearings, pneumatics, pumps, filters, fasteners, and automation. These businesses have used the downturn to become leaner and are trading on trough earnings and trough multiples, while secular reshoring provides an additional demand tailwind. The opportunity is in basic US industrial champions that have been off the radar for years.

Regulated utilities are signing large-load customers to 15-year contracts, locking in 8–9% EPS growth and 3–4% dividend yield for a 12–13% total return with extended visibility. NextEra Energy is the go-to power developer for Google, and its acquisition of Dominion gives it access to the power-constrained PJM market, improving its growth profile further.

Powell Industries makes critical industrial circuit breakers. Historically serving oil & gas, it has recently expanded into utility and data center markets, announcing a large data center contract last quarter. This new demand could cause its earnings to double or triple over the next few years.

The US needs a mammoth amount of high-voltage transmission reinvestment because the grid is outdated. Quanta Services is virtually the only contractor with its own skilled labor force for high-voltage projects, and American Electric Power has built 85–90% of the nation's high-voltage lines. Both are poised to win huge contracts.

Electrification is a multi-decade secular theme driven by manufacturing reshoring, data center buildout, transportation electrification, and electrification of everything. After 25 years of grid underinvestment, the US grid is the biggest pinch point, and the investment opportunity has a long duration. The Tema electrification fund (VOLT) captures this theme through equipment and utility stocks.