by Ryan Lewenza, CFA, CMT, Private Client Strategist, Raymond James
Capex Refresh
• Business investment or capital expenditure (capex) has lagged in this recovery. However, based on our analysis we believe it is set to accelerate and therefore recommend investors gain exposure to this investment theme, notably through the information technology and industrials sectors.
• Given record cash levels on corporate balance sheets, improved fiscal clarity from Washington, higher capital utilization rates, and the oldest capital stock levels in decades, we believe the conditions are right for a strong capex spending cycle in the coming quarters.
• Within the technology sector we believe the software and equipment sub- industries could experience outsized gains as these investments can have the largest impact on productivity/efficiency gains, which in turn drives stronger corporate profit growth. On the industrials side, we believe companies levered to oil & gas, industrial automation and machinery could see stronger sales/order growth driven in part by the energy and industrial renaissance in the US.
• On page 4 we provide a list of equity ideas which could stand to benefit from this expected increase in capital spending.
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