Industrial stocks from America's smokestack industries should do well in an economic recovery, right? After all, these cyclical industries - steel, coal, and the machinery and railroads to support smokestack-industry output - are the backbone of the recovery. And they'll be needing capital goods, the purchase of which were deferred during the recession.
Well, not exactly, a number of industry analysts advise. Yes, business is picking up. But unlike previous recovery cycles, it is not certain that heavy industry will be needed for the sort of ambitious undertakings it was known for in the late 1970s. Nor is it certain that heavy industry will have the funds to invest in the capital equipment.
The Commerce Department last week reported capital spending plans were up slightly in the second quarter. Still, a number of analysts see the unfolding recovery as being strong in the consumer area but relatively weak in capital goods, except for selected companies.
Merrill Lynch analyst Daniel Rolings contends, ''We're in a growth mode, but we can't expect a great many capital expenditures.''
However, Mr. Rolings expects smaller steel companies to ''participate nicely in the recovery,'' and says demand for coal should increase, since a recovery will demand more use of electric power.
As a group, the ''big uglies,'' as Salomon Brothers research director Robert S. Salomon Jr. calls the old-line industries, are simply not going to ride the recovery wave. Salomon Brothers favors some cyclicals, including newspaper and semiconductor stocks. In chemicals, Salomon has favored Dow; in forest products, Kimberly- Clark; and in metals, LTV.
Even when the recovery is in full swing, contends Lee H. Idleman, research director at Dean Witter Reynolds, steel production may never grow to much more than 60 percent of capacity; steel is currently gauged at 56 percent of plant capacity. But already aluminum is at 90 percent and will quickly reach 100, Mr. Idleman contends. This allowed an aluminum ingot price increase in July, and Dean Witter has been aggressively recommending Kaiser Aluminum & Chemical, Aluminum Company of America, Alcan, and Reynolds Metals.
Salomon Brothers sees the recovery as moving rather more slowly than the optimists see it. Like Merrill Lynch and Dean Witter, Salomon sees capital spending as receiving relatively light emphasis. The primary reason for this, Robert Salomon says, is continuing record-high, inflation-adjusted interest rates. Salomon says high interest rates are a ''major disincentive for companies to spend on capital goods. Treasury Secretary Donald Regan has criticized these rates as ''too high relative to the amount of inflation.''
Analysts say that before the recession, much of the capital spending came about through one-time needs. These, says Rolings at Merrill Lynch, included major American industrial projects in third-world countries: Saudi Arabian infrastructure and petrochemical facilities, Brazilian steel plants, etc. To those, Salomon adds the 1970-era investments in pollution-control devices and environmental cleanup.
This time around, says Idleman of Dean Witter, a new set of needs may become even more important incentives to spending: technology and productivity enhancement. ''Anything to keep costs down at a time of excess plant capacity and equipment is going to be important,'' he explains.
These items include data processing equipment and factory robots. Rather than simply invest money to add to productive capacity, Idleman says, many industrial companies will choose to buy underutilized capacity in related companies.
''When money costs 12 percent or more, it may be better to buy space than money,'' Idleman says.
These analysts see further factors keeping capital investments in basic industries at low levels. Foreign competition continues to make inroads on steel and autos. American coal, a high percentage of which is exported, is dependent on worldwide economic recovery for growth. And a strong dollar hampers American manufacturers in foreign markets.
Nevertheless, the perception on Wall Street remains that the economy is moving ahead and that cyclical stocks - not all of them, but many of them - are important buys today. In contrast to other brokerage firms, Paine Webber recently upgraded the capital-goods sector from average to above average and has for months been rating basic industries as above average.
''This market is just not working the way previous markets have,'' says Paine Webber's chief investment officer, Ronald A. Glantz. ''The fundamentals just don't justify what's happening. But our job is to make money for clients, so if the methodology doesn't work, we leave it behind.''
Mr. Idleman is a bit more philosophical: ''One must be very selective. That's the way every recovery is. We always think we're in a new world. But the way it always happens is that some industries move ahead, some are left behind."
The stock market seemed to reflect that sentiment, moving ahead well for most of the week on the strength of cyclical industrial stocks.
The Dow Jones industrial average closed the week at 1,239.74, up 24.29 points.