“Revich believes we’re approaching an ‘above-normalized share of capital expenditure’ in a number of areas for machinery makers, and argues that investors have to be selective in the sector,” according to Barron’s. “He prefers to focus on companies with end markets with low capital stock, like mining and agriculture, as well as those with improving returns on capital and competitive moats.”
Traders could also hedge against further risk in the industrials sector through bearish ETF plays like the ProShares UltraShort Industrials (NYSEArca: SIJ), which tracks the inverse 2x or -200% daily performance of the Dow Jones U.S. Industrials Index. SIJ jumped 6.6% over the past week as XLI dipped 3.9%.
For more information on the industrials sector, visit our industrials category.