On-shoring 2026
On-shoring Outlook 2026–2031
January 21, 2026
The Long View
In my 40 years on Wall Street, I have witnessed several distinct market cycles—from the inflation of the 80s, to the dot-com boom and bust in the 90’s, and through the post-2008-2009 and pandemic eras of ultra-cheap capital. As we settle into 2026, it is clear we have entered a new, structural paradigm. The era of "growth at any cost" is ending. We are now firmly in the era of "The Industrial Renaissance." This shift is not merely cyclical; it is secular. The United States is in the early stages of a massive re-industrialization effort, driven by the necessity of supply chain control and energy independence.
I must give credit to Richard Bernstein, of Richard Bernstein Advisors, for identifying this macro trend back in 2016. His thesis—that deglobalization would shift market leadership from speculative technology to the "real economy"—is now our True North. Bernstein correctly argues that capital scarcity in the industrial base will lead to higher returns on that capital.[1]
We are seeing this play out in real-time as the "On-Shoring" trade accelerates.
The Strategy: Investing in the "Pick-and-Shovel" Providers
Our current strategy focuses on the companies building the new American industrial base. We are not just buying "manufacturing"; we are buying the critical infrastructure, automation, and component suppliers that make re-industrialization possible.
Below is our review of the top ten holdings in this strategy, along with the key metrics we are monitoring and our 5-year return expectations.
Company Specific - Review & Outlook
1. The Infrastructure Builders
You cannot have a new economy without a new grid and new factories.
• Powell Industries (POWL) – Proj. 5-Yr CAGR: 10% – 12%
o The Outlook: Powell is the linchpin of the electrical grid. As new data centers and factories come online, the demand for complex switchgear is outpacing supply.
o Key Metric: Backlog Conversion Rate. (Are they turning record orders into cash efficiently?)
• Caterpillar Inc (CAT) – Proj. 5-Yr CAGR: 12% – 14%
o The Outlook: The "Mega-Projects" of this decade (chip fabs, battery plants) require massive earth-moving capability. CAT is also leading the charge in autonomous mining, transforming from a machinery company to a tech-industrial hybrid.
o Key Metric: Autonomous Adoption Rate.
• Terex Corp (TEX) – Proj. 5-Yr CAGR: 9% – 11%
o The Outlook: Terex has successfully pivoted toward environmental solutions and materials processing. As the US focuses on a "circular economy" (recycling/waste management), TEX is a prime beneficiary.
o Key Metric: Materials Processing Margins.
2. The Automation Architects
To compete with foreign labor, US factories must be smarter and more automated.
• Rockwell Automation (ROK) – Proj. 5-Yr CAGR: 11% – 13%
o The Outlook: Rockwell is the operating system for the modern American factory. With wage inflation sticky, automation is no longer a luxury—it is a survival necessity for manufacturers.
o Key Metric: Annual Recurring Revenue (ARR) growth from software.
• Cognex Corp (CGNX) – Proj. 5-Yr CAGR: 14% – 16%
o The Outlook: Cognex provides the "eyes" (machine vision) for automated lines. As logistics and warehousing continue to automate to meet e-commerce demand, Cognex’s growth runway remains long.
o Key Metric: Logistics Revenue Growth.
3. The Industrial Core & Supply Chain
The "boring" businesses that keep the machines running are often the best compounders.
• The Timken Company (TKR) – Proj. 5-Yr CAGR: 10% – 12%
o The Outlook: Every shaft needs a bearing. Timken has moved up the value chain into "industrial motion," serving robotics and renewable energy sectors.
o Key Metric: Organic Growth in Industrial Motion.
• Applied Industrial Technologies (AIT) – Proj. 5-Yr CAGR: 10% – 12%
o The Outlook: As a key distributor, AIT is the "circulatory system" of the factory floor. Their technical service model makes them indispensable to customers who lack internal engineering depth.
o Key Metric: Daily Sales Rates (DSR)—a pulse check on US factory utilization.
• Gates Industrial Corp (GTES) – Proj. 5-Yr CAGR: 12% – 15%
o The Outlook: While known for power transmission, Gates is seeing secular growth in thermal management (liquid cooling) for AI data centers.
o Key Metric: Data Center Thermal Revenue.
• Ingersoll Rand (IR) – Proj. 5-Yr CAGR: 11% – 13%
o The Outlook: Compressed air is the "fourth utility" of manufacturing. IR’s "self-help" operational improvements have turned it into a cash-flow machine.
o Key Metric: EBITDA Margin Expansion.
4. The Strategic Defense
• ATI Inc (ATI) – Proj. 5-Yr CAGR: 15% – 18%
o The Outlook: Aerospace and defense are at the center of the onshoring trend due to geopolitical risks. ATI’s specialty alloys are critical for next-gen aircraft and defense systems.
o Key Metric: High-Performance Alloy Mix %.
Conclusion
At Harvest Portfolio Management, we believe the market is still underestimating the duration of this industrial cycle. As Richard Bernstein has noted, these "Capital Goods Super-cycles" can last a decade or more. We are positioned not for the next quarter's earnings beat, but for the re-building of America's industrial capacity over the next five years.
Mark Seski, Chief Investment Officer, Harvest Portfolio Management, LLC
[1] A Note on "Capital Scarcity": When investors ignore a specific sector (like manufacturing or "the industrial base") for a long time, very little money flows into it. This creates "capital scarcity." Because there is less money chasing opportunities in this sector, fewer new companies are started and weak ones go out of business, causing less competition. The remaining stronger companies gain pricing power and don't have to fight price wars. Consequently, when demand returns—as it is now with on-shoring—these few remaining companies can charge more and operate more efficiently, leading to significantly higher profits than companies in overcrowded "popular" sectors.
