Schneider National truck
As manufacturing activity picks up, the demand for construction equipment and tractors is spiking. Channel checks from the Association of Equipment Manufacturers shows tractor sales were up 15% in February and January.
Optimism in the industry and the prospects of a large infrastructure bill from the Biden administration have given lift to the industrials stocks. Caterpillar and Deere, for example, are less than 3% from record highs and have well outperformed the S&P 500 so far this year.
Mark Tepper, president of Strategic Wealth Partners, said it may serve investors to look elsewhere for better value to ride a boom in manufacturing.
"You're too late on a lot of these names," Tepper told CNBC's "Trading Nation" on Monday, contending most of the good news has already been priced into Caterpillar and Deere.
"If you really want to play these themes, I think you need to search a bit deeper, you need to find some of those derivative plays and in my opinion trucking is an overlooked sector that right now is on a tear," he said.
The S&P 500 trucking subsector has risen 5% in the past month.
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"We own Schneider," Tepper said. "If you think of all the inputs that go into tractors from the wheels to the seats to the engines, they all need to move from one part of the country to the next. So I think right now the play is trucking over tractors, I think there's more upside there."
Schneider trades at 16 times forward earnings, lower than the more than 20 times multiple for Caterpillar and Deere.
Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, opts for a more diversified approach.
"If you take a broader view and you look at the sort of expected over $2 trillion infrastructure package, you could play that broadly with the PAVE ETF, which is a U.S.-based infrastructure ETF. It owns Deere but it also owns things like Vulcan Materials," Sanchez said during the same interview.
The PAVE ETF has risen more than 12% this year, better than the XLI industrial ETF's less than 7% gain.
Disclosure: Strategic Wealth Partners holds SNDR.
