Barring any dramatic moves in the next few weeks, these 10 mighty companies will be the best performing industrial stocks of the year. Let's see what we can learn from them and whether they are still stocks worth buying.

A rising chart with 2019 written below it

Image source: Getty Images.

The best performing industrial stocks of 2019

Let's start with a rundown of the stocks and their performance so far in 2019. For reference, all the companies have a market cap above $10 billion and I've avoided defense companies as they have their own industry dynamics and specific end market exposure.

TDG Chart

TDG data by YCharts

Three conclusions immediately spring to mind:

  • Aerospace remains a hot sector to invest in, as shown by TransDigm Group (NYSE:TDG), HEICO (NYSE:HEI), General Electric (NYSE:GE).
  • Value is always in style. GE, Johnson Controls (NYSE:JCI) and Dover (NYSE:DOV) are both proof of that.
  • Execution and quality of earnings matters. This is where Ingersoll-Rand (NYSE:TT), Teledyne (NYSE:TDY) Danaher (NYSE:DHR), Allegion (NYSE:ALLE), and Zebra Technologies (NASDAQ:ZBRA) come in.

Hot aerospace stocks 

Aerospace plays TransDigm and HEICO are leading the way, while the strongest parts this year for conglomerate General Electric has been their aerospace segments. 

It marks another strong year for the industry even as passenger growth slowed and worldwide airline profit is set to dip. No matter: All the aerospace companies reported strong growth from aftermarket parts/service revenue -- somewhat surprising given slowing passenger growth.

Airline Metric







2019 (Estimate)

Passenger growth








Passenger load factor








Operating profit

$3.5 billion

$4.6 billion

$8.6 billion

$8.5 billion

$7.5 billion

$5.8 billion

$5 billion

Data source: International Air Transport Association.

Looking ahead, it seems likely that the aerospace market will remain strong in 2020. About 49% of respondents (airline CFOs and heads of cargo) to an International Air Transport Association survey believe profitability will increase over the next 12 months, while only 27% believe it will decrease. That's good news for TransDigm and HEICO -- two plays on the commercial aviation aftermarket due to their history of growth through acquisitions.

But there's one slight cause for concern: It's far from clear how much impact that the grounding of the Boeing 737 MAX has had on aftermarket demand as older planes are run more in the plane's absence -- something that could reverse itself if and when the MAX returns to service.

In these circumstances, TransDigm is probably still a good value, but it's hard to argue that HEICO is, too.

TDG PE Ratio (Forward 1y) Chart

TDG PE Ratio (Forward 1y) data by YCharts

The value investment plays

The case for buying Dover has long been about the potential to generate earnings growth through restructuring and cutting costs, and management has executed very well on it. Meanwhile, the company has continued its ongoing shift to make its revenue less cyclical -- microphone company Knowles and upstream oil and gas business Apergy have been spun off in the last five years.

Dover is probably close to fair value now, but it's a Dividend Aristocrat with a 63-year record of raising dividends, and has a well-covered payout. 

GE's rise in 2019 is as much a part of CEO Larry Culp having set the bar low for the company when he took over as it is about the strong growth in aerospace and the slow turnaround in progress at power. No matter: It's better to underpromise and overdeliver than the other way around, and GE has made progress on reducing debt and improving cash flow generation.

Frankly, GE looks slightly undervalued, but if gas turbine end demand is set to grow again, then the restructuring at power could be made a lot easier.

GE and Dover are both companies undergoing significant restructuring and Johnson Controls investors have also been rewarded by management's determination to extract value in the portfolio through corporate actions in recent years. The automotive seating business Adient (NYSE:ADNT)was separated in 2016 and the sale of the power solutions (automotive batteries) in 2019 left the company focused on building technologies and heating, ventilation and air conditioning (HVAC). 

Execution and good-quality management 

Danaher's life sciences and diagnostics exposure means it's a safe place to hide as the broader industrial sector slows in 2019 and 2020. In addition, the company continues to grow revenue in mid single digits while shifting toward a higher percentage of recurring consumables revenue. Meanwhile, it's becoming increasingly clear that the deal to buy GE's biopharma business is very good news for Danaher.

The chart below shows the big reason why Danaher, HVAC company Ingersoll-Rand, barcode printer and scanner maker Zebra Technologies, security door and lock company Allegion, and digital imaging and instrumentation company Teledyne have outperformed: It's largely down to excellent margin expansion in recent years.

TDY Operating Margin (TTM) Chart

TDY Operating Margin (TTM) data by YCharts

Zebra Technologies barcode scanners help manufacturing and logistics companies gather data and better manage their physical assets. If companies are going to increase spending on robotics and automation and if warehouse logistics are set for strong growth as a result of e-commerce growth then Zebra will be a key beneficiary. 

Allegion, a company set to benefit from the convergence of electronics and mechanics in the security lock and door industry, has outperformed thanks to stronger than expected growth in its core Americas region. It may not sound like a sexy industry but the implementation of web-enabled devices in security products is set to change how the industry works. 

Meanwhile, Teledyne's margin expansion has been driven by a string of successful acquisitions that have increased its exposure to digital imaging -- a key growth area in an increasingly data-rich world. That said, Allegion and Teledyne are hardly cheap stocks right now. 

Ingersoll-Rand's valuation is somewhat cheaper. And its raising of earnings guidance through 2019 and continued strong growth in HVAC orders suggest it can continue its growth trajectory. Throw in some growth potential from the refocusing of the business after its noncore industrial business merger with Gardner Denver, and Ingersoll-Rand stock still has some upside potential left.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.