Great Old Economy Business That Isn’t Full of Hot Air

By Thursday, February 7, 2013

Great Old Economy BusinessThe stock market seems to have a bit more momentum in it over the short term. I’m still extremely cautious going forward, because the current up cycle in stocks and the economy is due for a break, even on a historical basis.

Regardless of what the main stock market indices are doing, there are a lot of good businesses out there; and a lot of “old economy” companies are actually doing very well in the current environment. These are bricks-and-mortar industrial and consumer businesses that deliver the practical products we need for the economy to function.

Not too long ago in this newsletter we looked at a great old economy business, A. O. Smith Corporation (NYSE/AOS), which manufactures and sells water heaters and boilers. (See “The Old Economy’s Back and It’s Making Great Money.”) You might not think that such a mature, old economy business could be doing so well, but this company is growing its revenues and earnings. On the stock market, A. O. Smith has tripled over the last 10 years, not including dividends. Further adding to this, it’s also fairly priced on the stock market.

Nothing gets more old economy than the distribution of gases used for welding and construction. Consider Airgas, Inc. (NYSE/ARG) out of Radnor, PA. This is a $7.0-billion company that pays dividends. It sells propane, oxygen, nitrogen, and many other gases for industrial and medical use. That’s pretty old economy if you ask me, and it’s a solid business.

On the stock market, Airgas has been a powerhouse wealth creator—and I never would’ve thought that industrial gases would be such a lucrative business. The stock has been moving virtually straight upward for the last 10 years. The company’s stock chart is below:

ARG Airgas, Inc stock market chart

Chart courtesy of

I love finding businesses like Airgas; and in this particular case, I can’t imagine demand for welding, industrial, and medical gases going down—at least not for an extended period of time. And what I like about this old economy business is its long-term consistency, both in its financial growth and on the stock market. I’d rather own a consistent wealth creator like Airgas than bet on a new technology any day of the week.

The old economy is back and countless industrial companies like Airgas are doing great. But here’s the kicker—a lot of these companies have been doing great on the stock market for years; you don’t hear about them. Want to know why? Because in the media, you just can’t sell it. Everyone wants to hear about Apple, Google, the end of the world, or Beyoncé, so the marketplace delivers. You just can’t sell a headline like, “There’s Really Good Money in Industrial Gases.” Nobody’s going to buy it.

And this is the struggle that many old economy companies have faced on the stock market for a number of years. Fortunately, times have changed, because there is no real economic growth out there. All of a sudden, stable, good businesses from all kinds of esoteric industries are doing well on the stock market, while former market leaders are trending lower.

The stock market is going higher over the near term, and when it corrects, the first stocks investors should consider accumulating are old economy winners that aren’t front-page news. These are the businesses that will keep delivering when everything else falls apart.

About the Author | Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Sep. 4, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter) $1014.15
Trailing 12-month Price/earnings multiple (Most Recent Quarter)


Dow Jones Industrial Average Dividend Yield 2.62%
10-year U.S. Treasury Yield 2.19%

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.


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