The Bottom Line 7-12

Last week, TRG spent time in the field, kicking the tires in Atlanta and catching up with clients in Boston. TRG’s Industrial & Construction stocks have performed better in 2019, after underperforming relative to the market for the past two years. TRG maintains that, while the market is continuously looking around the corner for the next recession, we think the market anticipation that the next recession will look like the last is misguided. In our opinion, the next downturn will not be a housing-led recession, in part because housing numbers aren’t big enough to put a dent on the economy. Moreover, the type of non-res construction projects in this cycle are meaningfully different, being impacted by the most significant population shift in 100+ years and fundamental changes in the types of non-res construction projects, driven by changes in how business is conducted (i.e., ecommerce, distribution centers, data centers). Finally, infrastructure funding on a state DOT level has also fundamentally changed, as was confirmed by our meeting with the Georgia DOT this past week, providing meaningful visibility for 5+ years. As such, we found our round of meetings in Boston refreshing because we focused on our top stock ideas, including MHK, MAS, FBHS, OC, and TILE, to name a few.

Leisa Childers