While higher material costs, such as steel, have made production much more expensive for industrial firms, many companies have been able to pass that increase along to customers. And with the deep decline of the dollar, international buyers aren't balking. Many of them consider U.S.-produced goods to be already priced at a discount.

"With the drop [in] our currency, we can export our way out of this," says Stephen Atkinson, a pulp-and-paper analyst with BMO Capital Markets.

Atkinson is very positive on the pulp-and-paper manufacturers, which he says are making money despite the increase in manufacturing costs. On his radar: International Paper and Packaging Corp. of America, because of earnings and cash flow. Lake Forest, Ill.-based Packaging Corp. saw net sales of $616 million in the second quarter, up 5.2% from the same quarter last year. And it has projected third-quarter earnings of 41 cents per share, above analysts' consensus. Memphis, Tenn.-based International Paper saw a nearly 20% surge in profits, from $190 million in last year's second quarter to $227 million in this year's.

Packaging firms are also getting a positive nod from analysts. That's partly because these firms are traditionally viewed as defensive stocks. "There's a trade-down during a recession—from fresh, to frozen, to cans," says Chris Manuel, a director and analyst at KeyBanc Capital Markets. "Plus, when the economy gets worse, people drink more."

That's likely sweet news to international conglomerate InBev, which just made the historic purchase of St. Louis-based Anheuser-Busch for $52 billion. And the trend bore out with Crown Holdings' recent earnings, reporting income growth of 9% in its second quarter of 2008 from the same quarter the year before. "They seem almost bulletproof," Manuel says. "The firm even raised its annual guidance twice this year. It's going to make more money despite problems of material and energy costs."

That's not to say every packaging group is walking away unscathed. Lake Forest, Ill.-based Pactiv had a rare midyear price increase on its product line, and seems to be struggling in the short-term, Manuel says. "Still, they're a terrific business. Nothing's broken, and eventually they will come around. They're just not doing well in this environment."

Industrial conglomerates are faring a bit better, especially those deriving at least 50% of their revenue from international markets, says Richard Tortoriello, an equity analyst with Standard & Poor's.

He is especially buoyant about Honeywell, which, he notes, is beating analysts expectations. "It's executing well in a tough environment," he says.

Tortoriello says that industrials are very well positioned for this particular market. Those that survived this sector's decimation in the 1970s—as businesses went overseas for cheaper labor and costs—are lean and mean, and able to withstand the storms.

"It's difficult for companies in China or Russia to duplicate the technological edge that great U.S. industrial survivors have," Tortoriello says. "They're tough competition, and are in a good position."