Dow Companies With Bright Future (AA, F, GM, HD, LUV, DAL, JBLU)

Bullish sentiment seems like it is regaining strength like it did good ol' days of 1995-1998. Why not compare today to 2005-2007? Put simply- because it was driven by speculation on mortgage backed securities and easy access to capital rather than fundamentally-sound earnings growth. Dow Jones Industrial Average From 1995-1998 (approximately). 1995: 3,850 1998: 7,900 (Represents a 105% gain in the Dow.) 2005: 10,600 2007: 13,360 (Represents a 26% gain in the Dow.) What has changed to allow this catalyst to occur? Multinational corporations are going to be the largest beneficiary of global demand that is occurring within industrials. All the old “smoke stack” companies have now became lean, mean, fighting machines. When you think of an Alcoa AA that primarily produces aluminum for the production of aircrafts, automobiles, commercial transportation, building, and commercial construction, you think of an antiquated and unionized way of life, with all of its over-entitlements and environmental liabilities. However, that might be a false assumption. Alcoa is no longer a Pittsburgh, PA-based, “rust belt” metals firm. Alcoa has a profitable recycling strategy and they claim that nearly 75% of all aluminum produced since 1888 is still in use today. (Read more about AA's recycling here.) Demand, Demand, Demand… In the U.S., we have roughly 310 million people that contribute to our Gross Domestic Product (GDP). Contrast this to a total population of 1.33 billion contributing to China's GDP, this represents 329% more demand than the aging population in the U.S. China, on the other hand, has 495 million men between the ages of 15-64, according to CIA estimates established in July of 2010. Cyclical Rotation How long will the momentum last for the autos, airlines, and building sectors? The natural business cycle for airlines can last 5-7 years. Companies like Southwest Air LUV, Delta Air DAL, and JetBlue Airways JBLU periodically need to replace aging aircraft as it becomes uneconomical to keep repairing aging fleets. Additionally, taking into consideration depreciation expenses that are tapped out no longer decreases a firm's pre-tax income stream as a form to lowering income taxes liability. Not only will Alcoa receive leverage from this cyclical rotation, but Ford Motor F, General Motors, GM, and Home Depot HD will prosper when using the same principle thesis behind the cyclical rotation. Disclaimer Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that your own due diligence and consult a certified financial professional for personalized advice about your financial situation.