The industrial small caps picking themselves up off the mat after a rough 2020

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While much of the ASX has recovered at least some of the ground lost during COVID-19, this has not been the case with the industrials sector.

This sector includes construction, engineering and machinery firms as well as trading companies and distributors in the field.

On average, industrials stocks are down 28 per cent in 2020 and even in June have lagged another 8 per cent.

However, there have been some bright spots in recent weeks, with some set to emerge from the second quarter in better shape than they entered.

Client wins have been a big help for some. Homebuilding robot maker FBR (ASX:FBR) has continued to rally since signing a West Australian display home builder as a client. It also helped it had good news earlier in June that its robots had reached commercial layspeed.

Precision welding technology stock K-Tig (ASX:KTG) has also gone on a run this month. The major catalyst has been a memorandum of understanding with Bisalloy Steels, announced a fortnight ago, for the pair to work on advanced steel manufacturing for government defence projects.

Scaffolding provider Acrow Formwork & Construction Services (ASX:ACF) is another winner this month, albeit with a more modest 10 per cent gain.

The company’s share price has climbed higher off the back of several high-profile public sector contract wins. Acrow expects to grow its order book further as governments spend more to help the economy recover from COVID-19.

“If projects are government funded and you’ve got a big exposure to government-funded projects, I think you’re actually going to be in for a pretty good time and that’s the way we see it — we’ve got major exposure there,” managing director Steven Boland stold Stockhead.

“If you’re in a part of the industry more exposed to privately funded projects, there’s no doubt that privately funded projects are going to be under some pressure in the next period of time.”

Lockdown easing helps

Other stocks have also gained as lockdown restrictions have eased.

Environmental and laboratory testing service provider HRL Holdings (ASX:HRL) has surged 39 per cent in the last month.

Its rally has come since COVID-19 restrictions were completely lifted in New Zealand, where its factories are located.

Traffic equipment provider Saferoads (ASX:SRH) has also benefited from the easing of restrictions.

While the company noted it had seen reduced orders, it said the relaxing of measures such as enforcing people to stay at home would be a good thing. Saferoads is still forecasting a profit before tax this financial year.

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