Fresh data indicates that global manufacturing is undergoing a revival. Output across the U.S., U.K., China and Japan has increased after a considerable lull. This comes as welcome news for the sector which has been embattled over the greater part of the last two years.

Indeed, such data provides hope for a resurgent global economy in the days ahead. It makes good sense at this point to invest in companies from the sector from the four countries currently leading the manufacturing charge.

Global Manufacturing Rises, ISM Index Hits Record High

According to financial major JPMorgan Chase & Co. (JPM - Free Report) a global resurgence in manufacturing is underway. The financial major’s global manufacturing PMI for December increased by 0.4 points to hit 53.8. This is the highest level recorded in more than two years. According to JPMorgan, the latest reading indicates that global production is growing at an annualized rate of 3.7%.

This marks a significant improvement over 2015 and the first half of 2016 when output growth was recorded at a mere 1.1%. JPMorgan believes that stronger pricing power and projected increases in profits and expenditure is likely to provide a major boost to manufacturing worldwide this year. Currently, the financial major’s 2017 growth forecast for manufacturing stands at an average of 2.5%.

Nowhere is this improvement more marked than in the U.S., as recent data reveals. The ISM manufacturing index rose from 53.2% in November to 54.7% in December and reached its highest settlement in last two years. The manufacturing index has expanded over nine months out of last ten months. This was also higher than the consensus estimate of 53.8%. Meanwhile, U.S. construction spending increased to its highest level since Apr 2006 in November.

China, U.K., Japan Notch Up Manufacturing Gains

Meanwhile, the China Caixin manufacturing PMI increased from 50.9 in November to 51.9 in December. The reading exceeded all forecasts and hit its highest level in six years. Lending and construction has picked up in the country, boosting overall demand. Output has increased at the quickest rates since Jan 2011 while new orders also clocked up gains.

Manufacturing has also staged a comeback in Britain, growing at its sharpest pace in nearly two and a half years. The Markit/CIPS UK PMI increased from 53.6 in November to 56.1 in December, registering its strongest reading since Jun 2014. The economy seems to be largely unscathed following the shock Brexit verdict and in fact, has gained from the subsequent decline in the value of the pound.

Rounding off the list of countries witnessing a turnaround in manufacturing is Japan. The Nikkei Japan Manufacturing PMI has increased from 51.3 in November to 52.4 in December, registering its highest reading since Dec 2015. This has been an impressive turnaround, given that the outlook was dismal in May last year. The index for new orders has touched its highest point in a year, primarily due to a rise in domestic demand.  

Our Choices

Data from these four major economies reveals that manufacturing is on a much firmer footing. Following a dismal performance in the recent past, the sector seems to have recovered lost ground and is set to have a successful 2017.

Adding manufacturing stocks from these countries to your portfolio would make for a prudent move. However, picking winning stocks may prove to be difficult.

This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. 

Each of the stocks selected have a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EnerSys (ENS - Free Report) engages in manufacturing, marketing and distribution of various industrial batteries including motive power, reserve power, aerospace and defense applications. The company is headquartered in Pennsylvania.

EnerSys has a VGM Score of A. The company has expected earnings growth of 16.5% for the current year. The stock has returned 47% over the last one year, outperforming the Zacks Manufacturing – Electronics sector, which has returned 26.2% over the same period.

Altra Industrial Motion Corp. (AIMC - Free Report) is one of the leading manufacturers and distributors of a diversified range of mechanical power transmission, or MPT components. The company is headquartered in Braintree, MA.

Altra Industrial Motion has a VGM Score of B. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 21.71, lower than the industry average of 22.70. Its earnings estimate for the current year has improved by 4.6% over the last 30 days. The stock has returned 53.7% over the last one year, outperforming the Zacks Manufacturing - General Industrial sector, which has returned 25.1% over the same period.

Konica Minolta, Inc. (KNCAY - Free Report) is engaged in the manufacture and sale of imaging products including printers, lenses, and display materials. The company is based in Tokyo, Japan.

Konica Minolta has a VGM Score of B. The stock has a P/E (F1) of 16.19, lower than the industry average of 16.28. The stock has returned 4.2% over the last one year, outperforming the Zacks Office Automation And Equipment sector, which has lost 6.5% over the same period.

Angang Steel Company Ltd. (ANGGY - Free Report) is engaged in the production, processing, wholesale, and retail of steel and related products in China.

Angang Steel has a VGM Score of B. The stock has a P/E (F1) of 15.99, lower than the industry average of 16.08. Its earnings estimate for the current year has improved by 19.8% over the last 30 days. The stock has returned 49% over the last one year, underperforming the Zacks Steel - Producers sector, which has returned 76.1% over the same period. This provides a good opportunity to buy the stock given that there is significant upside potential

Tate & Lyle plc (TATYY - Free Report) is a provider of solutions and ingredients to the food and beverages industry in the United Kingdom.

Tate & Lyle has a VGM Score of A. The company has expected earnings growth of 12% for the current year. The stock has a P/E (F1) of 14.77, lower than the industry average of 20.20. The stock has lost 1.4% over the last one year, underperforming the Zacks Food - Miscellaneous sector, which has returned 9.3% over the same period. This provides a good opportunity to buy the stock given that there is significant upside potential