10 Best Industrial Distribution Stocks to Buy Now

08. Watsco, Inc. (NYSE:WSO)

Number of Hedge Fund Holders: 29

Watsco, Inc. (NYSE:WSO) stands out as a key player in the industrial distribution sector due to its leadership in distributing air conditioning, heating, and refrigeration equipment across the U.S. and internationally. The company’s extensive product lineup, which includes residential and commercial HVAC systems, replacement parts, and ancillary supplies, supports contractors servicing both replacement and new construction markets. Watsco’s established presence and diverse offerings in this sector make it a strong inclusion among the best industrial distribution stocks to invest in now.

As of Q2 2024, 29 hedge funds have invested in Watsco, Inc. (NYSE:WSO), a slight decrease from 31 in the previous quarter. Despite this, Watsco’s fundamentals remain solid, underscoring its bullish outlook. In the second quarter of 2024, Watsco reported record sales, driven by strength in both the residential and commercial markets. This growth was further amplified by improving operational efficiency, with lower SG&A expenses as a percentage of sales. The company’s balance sheet is robust, positioning it to capitalize on growth opportunities through strategic investments.

Watsco, Inc. (NYSE:WSO) adoption of innovative technologies has been pivotal in enhancing its competitive edge. With over $2.5 billion in annualized e-commerce sales, the company’s digital platforms are playing an increasingly vital role in its success. Notably, OnCall Air, Watsco’s consumer-facing platform, helped contractors generate $743 million in sales, a 27% year-over-year increase.

Another growth driver is the company’s proactive stance on regulatory changes, such as the shift to low-GWP-A2L systems. These changes, alongside energy efficiency mandates, offer Watsco opportunities to further grow its market share, particularly in the heat pump segment, which has seen increased demand due to the electrification trend in heating systems.

Despite a slight dip in gross margins due to product mix variations and lower equipment sales,Watsco, Inc. (NYSE:WSO) strong cash flow and ongoing cost optimization initiatives position it for long-term growth. The company’s efforts to reduce SG&A expenses and improve operational efficiency will likely enhance profitability in the coming quarters, making Watsco, Inc. (NYSE:WSO) an attractive industrial distribution stock for investors.