Precision Castparts Corp. (PCP), United Parcel Service, Inc. (UPS): Make Money in Recovering Industrial Stocks the Easy Way

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some industrial stocks to your portfolio, the Industrial Select Sector SPDR ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics

ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR ETF's expense ratio -- its annual fee -- is a very low 0.18%, and it recently yielded about 2%.

This ETF has performed well, outstripping the world market over the past three, five, and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why industrials?

The industrials sector will see demand grow once the world's economies get back on track. While there are some signs that that is happening, some see the recovery as fragile.

More than a handful of industrial companies had strong performances over the past year. Power management company Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) soared 71%, with its $12 billion acquisition of Cooper Industries boosting its competitive position and giving it some tax advantages, too. Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) boosted its dividend by 11% earlier this year, and recently yielded 2.6%. Some worry about innovators eating Eaton's lunch, though.

Precision Castparts Corp.Precision Castparts Corp. (NYSE:PCP), up 38%, has been busy. The aerospace components maker recently acquired Permaswage for $600 million, and sold Primus Composites to Triumph Group Inc (NYSE:TGI). Its last quarter featured double-digit revenue and earnings growth, benefiting from the acquisition of Titanium Metals. One catalyst for the company is expected growth in commercial airplane sales.

United Parcel Service, Inc. (NYSE:UPS), up 13% and yielding about 2.9%, is trading near a 52-week high. The continued growth of e-commerce bodes well for the company, despite the recent move toward increased taxation of online purchases. United Parcel Service, Inc. (NYSE:UPS) workers recently signed a new contract, but some observers worry about employee dissatisfaction.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Railroad company CSX Corporation (NYSE:CSX) added 6%. It has been hurt by weakness in coal, but coal is likely to remain in demand internationally, and CSX Corporation (NYSE:CSX) is geographically well positioned to benefit from coal exports, with its access to Eastern and Gulf Coast ports. Transporting petroleum and other energy products is another revenue booster. The stock recently yielded 2.6%, and appears attractively priced, given industry consolidation and improvements.

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