Here we go again!
Stocks sold off sharply this morning on fears that the trade war was getting hot again. But this time, the dispute didn’t hinge on trade barriers, deficits, unfair practices… or any of the things that might normally spark a trade war.
Nope, it’s simpler than that: President Trump wants Greenland.
And he’s slapping 10% tariffs on most of the countries of Western Europe because they oppose him having it. The EU is now preparing massive countermeasures on U.S. exports.
We’ve seen this movie before.
Just at it seems that we’ve reached the boiling point, a deal gets hashed out or the tariffs get put on indefinite hold. Some might call it the “Art of the Deal.” Others might call it the “TACO” trade, short for “Trump always chickens out.”
Whatever you want to call it, the crisis passes, and everyone gets back to business. Within days it’s a distant memory.
Will this familiar script play out this time around?
Most likely… but there are a lot of variables to consider, not least of which is the pending Supreme Court decision on the legality of the president’s tariffs. And Trump really seems to want Greenland.
At any rate, we know that trying to trade based on headlines like these is a mistake. I’ve been doing this for over two decades now and I have never – not even once – met a successful investor who made money by reacting to news headlines or by trying to predict them.
The key to navigating a chaotic market like this is to tune out the noise and focus on the numbers. Follow a system with objective, well-defined trading rules. And then stick to your guns.
That’s the essence of my Green Zone Power Ratings system. It objectively rates stocks based on six primary factors – momentum, size, volatility, growth, value and quality – and it objectively assigns a numeric score. Stocks scoring 60 or higher are rated as “Bullish,” and my research has found that “Bullish” rated stocks outperform the market on average by two to three times.
Over the past several months, I’ve had a lot to say about the sectors most closely tied to the AI trade – technology, energy and even utilities. Today, I want to pivot to the grittier, more tangible corners of the stock market by doing a sector X-ray on the industrials sector.
AI may be transforming the way the world works. But ultimately, it’s good, old-fashioned industrial stocks that actually deliver the goods.
So, with that said, let’s jump into it.
A Peek Under the Hood
If you wanted blanket exposure to the industrials sector, you could always buy a sector ETF like the State Street Industrial Select SPDR ETF (XLI) and be done.
Of course, if you did that, you’re getting everything: the good, the bad and the ugly.
My Green Zone Power Rating system suggests that it pays to be more selective. Of the 67 stocks in the sector, nearly three quarters rate as either “Bearish” or “Neutral.” Only 17 rate as “Bullish” with a score of 60 or higher.
Where Do Industrials Pick Up Points?
As I mentioned earlier, my Green Zone Power Ratings system is a composite of six individual factors – growth, value, quality, momentum, volatility and size – each of which has several component subfactors. Let’s see where industrials score well, picking up points.
Interestingly, virtually all of them rate well on their quality factor. 60 out of 67 rate as “Bullish” on quality, driven by strong profitability. And more than half rate as “Bullish” on growth, at 35.
So, while the industrials sector might not have the new-economy sexiness of the tech sector, there’s clearly a lot to get excited about here. These are fast-growing, high-quality companies.
Perhaps surprisingly, given that industrials tend to be cyclical and economically sensitive, close to half rate as “Bullish” on their volatility factor. (Remember, a high score here means low volatility.)
Industrials don’t rate exceptionally well on momentum, which makes sense. Investors have had a real preference for new-economy tech in this bull market, and they just simply haven’t been as enthusiastic in their buying of old-economy stocks. That’s begun to change in recent months, though, as more investors catch on to the reality that our wildest tech ambitions must be anchored by an entire network of industrial processes.
Now, if there is one factor where industrials really tend to lose points, it would be value. It seems the sector as a whole isn’t particularly cheap, with only six industrials currently rated as “Bullish” on value.
La Crème de la Crème
My research suggests that value stocks are poised to do well in 2026. So, let’s drill down into those elite few that rate highly on value. I ran a screen of industrial stocks that rate as “Bullish” on value, momentum, quality and growth. We’re looking for high-quality growth stocks that are trending higher… and still trading at a reasonable price.
My screen produced three names.
One stock in particular might look familiar. I briefly mentioned United Airlines (UAL) on Thursday. In a world in which middle and working class Americans are struggling, both United and rival Delta Air Lines (DAL) are massively outperforming their peers by focusing on higher-income jet setters.
Interestingly, despite “Bullish” ratings on momentum, quality and growth – and a “Strong Bullish” rating on value – United rates as “Neutral” overall because it loses points on its volatility and size factors.
Leidos Holdings (LDOS) is officially an “industrial” stock, though it could arguably be classified as a technology company. The company builds software and systems for the defense, intelligence, civil and health markets. In a world absolutely obsessed with data, Leidos’s focus on surveillance and reconnaissance tech has gotten the attention of Wall Street. Leidos sports a “Strong Bullish” overall rating.
And finally, we get to logistics leader FedEx Corp (FDX). Perhaps anticipating a resurgence in trade after a rough 2025, Wall Street has been aggressively bidding up FedEx’s shares. They’re up by more than 50% from their April lows and continue to push higher. Interestingly, the volatility this morning didn’t have much of an impact on FedEx’s shares, implying that Mr. Market doesn’t expect the current trade spat to have much of a lasting impact.
To good profits,
Adam O’Dell
Editor, What My System Says Today
