by Jordan, Knauff & Company
11/25/2013

The Jordan, Knauff & Company (JKC) Valve Stock Index was up 29.3 percent during the last 12 months, above the broader S&P 500 Index which was up 23 percent. The JKC Pump Stock Index was up 37.8 percent for the same time period. The Institute for Supply Management’s Purchasing Managers’ Index (PMI) registered 56.4 percent in October, its highest reading in 2013. The New Orders Index rose to 60.6 percent. This is the third month in a row that the figure was above 60. At 57 percent, the Export Index was at its highest level since April 2012. The global manufacturing sector maintained its modest recovery in October with the JPMorgan Global Manufacturing PMI increasing to 52.1 percent. The global PMI has shown improvement in operating conditions in each of the past 11 months. Growth came from a broad base of nations—including the U.K., Canada, the Euro zone, South Korea, Taiwan, Canada and Japan. Japan’s PMI hit a 41-month high. International trade volumes increased, as new export orders hit their highest levels since March 2011.

Figure 1. Stock indices from Nov. 1, 2012, to Oct. 31, 2013
The Bureau of Economic Analysis reported that the U.S. gross domestic product (GDP) rose to 2.8 percent in the third quarter, its highest level of the year. The increase was because of positive contributions from consumer spending, businesses rebuilding their inventories, exports, spending on both housing and commercial real estate, and state and local government spending. Consumer and state and local government spending increased 1.5 percent. GDP growth was 1.1 percent in the first quarter and 2.5 percent in the second quarter of the year.
Figure 2. U.S. energy consumption and rig counts
The largest oilfield to be discovered in the past 35 years and the largest outside the Middle East, Kazakhstan’s Kashagan oilfield, began production. The U.S. Energy Information Administration (EIA) expects field production to reach just 25,000 barrels per day (bpd) by the end of 2013. Passing the U.S. in September, China’s steady growth in oil demand has made it the world’s largest net oil importer. The EIA estimates that liquid fuels consumption in China will increase by 430,000 bpd in 2014 and that China will continue to be the top importer through 2014.
Figure 3. U.S. PMI index and manufacturing shipments
On Wall Street, stocks rose in October despite the 16-day government shutdown at the beginning of the month. The S&P 500 Index rose 4.5 percent. The Dow Jones Industrial Average was up 2.7 percent, and the NASDAQ Composite Index gained 3.9 percent for the month. The Federal Reserve Bank said it would not slow its $85 billion bond buying program because of its weak growth outlook for the economy.

Reference

1. The S&P Return figures are provided by Capital IQ.



Jordan, Knauff & Company is an investment bank based in Chicago, Ill., that provides merger and acquisition advisory services to the pump, valve and filtration industries. Please visit www.jordanknauff.com for further information on the firm. Jordan Knauff & Company is a member of FINRA.