In this article, we will be taking a look at the 10 best industrial stocks to buy according to hedge funds.
Industrial stocks in the United States encompass a broad range of sectors including manufacturing, transportation, aerospace, defense, and construction. These sectors form the backbone of the American economy, driving innovation, employment, and growth. Companies within this category often engage in the production of machinery, equipment, and infrastructure essential for various industries. The performance of industrial stocks is closely tied to the overall health of the economy. Economic expansion typically boosts demand for industrial goods and services, while recessions can lead to contractions in this sector.
Recently, industrial stocks have shown resilience amid global supply chain disruptions and economic uncertainty, thanks in part to technological advancements and diversified service offerings. Advancements in automation, robotics, and artificial intelligence are transforming the industrial landscape. Companies are increasingly investing in smart manufacturing technologies to enhance productivity and reduce operational costs. Environmental concerns and regulatory pressures are pushing industrial firms toward sustainable practices. Companies are adopting greener technologies and renewable energy sources to meet regulatory standards and consumer expectations. Industrial stocks play a vital role in the US economy, offering a diverse range of investment opportunities. Understanding the dynamics of different sectors, keeping abreast of market trends, and evaluating economic indicators are crucial for making informed investment decisions in this space. With continued advancements in technology and a focus on sustainable practices, the industrial sector remains a critical and evolving component of the financial market landscape. Overall, industrial stocks returned close to 10% so far in 2024.
According to Federal Reserve Industrial Production and Capacity Utilization report, most major market groups saw gains in May. Consumer goods increased by 1.3 percent, driven by rises across all components except home electronics. Business equipment edged up by 0.2 percent despite a drop in transit, buoyed by gains in information processing and industrial sectors. Defense and space equipment rose by 1.0 percent, marking a nearly 10 percent increase from a year ago. The materials market group saw a 0.8 percent increase, with non-energy durables and non-energy nondurables each up by around 1 percent, and energy materials rising by 0.6 percent. In manufacturing, overall output rose by 0.9 percent in May, slightly above last year’s level. Durable manufacturing increased by 0.6 percent, nondurables by 1.1 percent, and other manufacturing (publishing and logging) by 0.2 percent. Within durable manufacturing, notable gains were seen in wood products (up 2.6 percent), machinery (up 2.3 percent), and computer/electronic products (up 0.8 percent). Furniture and related products saw the largest decline (down 2.6 percent). In nondurables, printing and support activities decreased by 1.5 percent, while other categories saw gains. Mining output rebounded with a 0.3 percent increase in May, following declines in the previous two months. Oil and gas extraction rose, offsetting decreases in other mining and support activities. Utilities output grew by 1.6 percent, surpassing last year’s level by 3.9 percent. Capacity utilization for manufacturing rose to 77.1 percent in May, slightly below its long-run average. Mining’s operating rate reached 92.7 percent, well above its average, while utilities remained notably below their typical operating levels despite a slight increase to 71.5 percent.
So, what are the best industrial stocks to buy in this current environment?
10 Best Industrial Stocks To Buy According to Hedge Funds
Our Methodology
We leveraged Insider Monkey’s comprehensive database of 920 prominent hedge funds to identify the top 10 industrial stocks with the highest level of hedge fund investment as of Q1 2024. These stocks are listed in order of increasing hedge fund ownership, providing insight into the most popular industrial stocks among elite investors.
Best Industrial Stocks to Buy According to Hedge Funds
10. RTX Corporation (NYSE:RTX)
Number of Hedge Funds Holders: 62
RTX Corporation (NYSE:RTX), a major player in the aerospace and defense sectors, offers services and systems to commercial, military, and governmental clients worldwide. The company is structured into three primary segments: Collins Aerospace, Pratt & Whitney, and Raytheon. Recently, RTX Corporation (NYSE:RTX) was awarded a contract modification worth $33.8 million by the Naval Sea Systems Command in Washington, D.C. This contract entails supplying spare parts for the Rolling Airframe Missile (RAM) program. Additionally, RTX Corporation (NYSE:RTX) is facing a class action lawsuit alleging age discrimination. Filed by the AARP Foundation and two law firms in the US District Court for the District of Massachusetts, the lawsuit claims that certain job advertisements from Raytheon displayed a preference for younger candidates. This alleged bias contravenes the federal Age Discrimination in Employment Act, the Massachusetts Fair Employment Practices Act, and the Virginia Human Rights Act. The company, initially based in Massachusetts, has recently moved its headquarters to Virginia. The number of hedge funds in Insider Monkey’s database owning stakes in RTX Corporation (NYSE:RTX) grew to 62 in Q1 2024, from 61 in the preceding quarter. The consolidated value of these stakes is nearly $2.42 billion. Among these funds, Ken Fisher’s Fisher Asset Management was the company’s leading stakeholder in Q1.
RTX managed to grow its topline by high single digits since the end of 2020 and currently trade at a forward P/E of 19. It is slightly undervalued if we assume that it will continue to grow at its current rate. However, bullish investors think many countries are prioritizing national security and are willing to invest more in advanced weaponry and defense systems. Rising tensions around the world, like the ongoing war in Ukraine, are prompting governments to gradually increase their military budgets and this will translate to more contracts and revenue for defense companies. That’s why RTX is attracting a large number of smart investors.
09. Parker-Hannifin Corporation (NYSE:PH)
Number of Hedge Funds Holders: 63
Parker-Hannifin Corporation (NYSE:PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. Parker-Hannifin Corporation (NYSE:PH) is thriving in commercial and military sectors, particularly in OEM and aftermarket channels. In Q3 FY 2024, its Aerospace Systems segment saw an 18% organic sales increase year-over-year, driven by strong demand in general aviation and military markets. Strategic acquisitions, like Meggitt plc in September 2022, expanded its customer base and global reach, contributing to a 3.4% sales rise in the first nine months of FY 2024. Parker-Hannifin’s Win Strategy boosted the segment’s adjusted operating margin to 24.7%, up 150 basis points. Moreover, Parker-Hannifin Corporation (NYSE:PH) is prioritizing shareholder returns with an 11.4% increase in dividends year-over-year and a 10% quarterly dividend raise in April 2024.
On June 17, Wells Fargo analyst Joe O’Dea affirmed a Buy rating on Parker-Hannifin Corporation (NYSE:PH) and established a price target of $630.00. As of June 19 closing, the company’s shares were valued at $506.83. In the first quarter of 2024, there were 63 hedge funds holding positions in Parker-Hannifin Corporation (NYSE:PH), consistent with the previous quarter according to Insider Monkey’s database. The total value of these holdings is approximately $2.28 billion. Ric Dillon’s Diamond Hill Capital held the largest stake among these hedge funds during this period.
Diamond Hill Capital Mid Cap Strategy stated the following regarding Parker-Hannifin Corporation (NYSE:PH) in its first quarter 2024 investor letter:
“Other top Q1 contributors included Parker-Hannifin Corporation (NYSE:PH). Diversified industrial and aerospace manufacturer Parker-Hannifin’s industrial business orders typically turn positive after five or six quarters of order declines. Accordingly, shares rose in Q1 in anticipation of a new cycle, implying a strong recovery for the company in the forthcoming calendar year.”
08. Linde plc (NASDAQ:LIN)
Number of Hedge Funds Holders: 65
Linde plc (NASDAQ:LIN) operates as an industrial gas company in the Americas, Europe, the Middle East, Africa, Asia, and South Pacific. It offers atmospheric gases, including oxygen, nitrogen, argon, and rare gases; and process gases, such as carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene. Linde plc (NASDAQ:LIN) announced its Q1 2024 earnings results on May 2. It reported a normalized EPS of $3.75 and revenue of $8.1 billion, down 1% from last year. The operating profit was $2.1 billion, with an adjusted profit of $2.3 billion, up 6%. For 2024, Linde plc (NASDAQ:LIN) expects an adjusted EPS between $15.30 and $15.60, reflecting an 8% to 10% growth. In a recent development, on May 2, Linde plc (NASDAQ:LIN) announced a long-term agreement with H2 Green Steel to supply industrial gases to the first large-scale green steel production plant. Linde plc (NASDAQ:LIN) will invest about $150 million to build, own, and operate an on-site air separation unit (ASU) in Boden, northern Sweden. This ASU will provide oxygen, nitrogen, and argon to H2 Green Steel’s plant, which aims to cut carbon emissions by up to 95% compared to traditional steelmaking methods. The new ASU is expected to begin operations by 2026 and will also serve Linde plc (NASDAQ:LIN) current and new customers in the local market.
The number of hedge funds in Insider Monkey’s database owning stakes in Linde plc (NASDAQ:LIN) fell to 65 in Q1 2024, from 74 in the preceding quarter. The consolidated value of these stakes is nearly $3.84 billion. Among these hedge funds, Alexander Mitchell’s Scopus Asset Management was the company’s leading stakeholder in Q1.
07. CSX Corporation (NASDAQ:CSX)
Number of Hedge Funds Holders: 70
CSX Corporation (NASDAQ:CSX) and its subsidiaries offer rail-based freight transportation services, including the transportation of intermodal containers and trailers. The company provides various other transportation solutions such as rail-to-truck transfers and bulk commodity operations. CSX Corporation (NASDAQ:CSX) also handles the transport of chemicals, agricultural and food products, minerals, automotive items, forest products, fertilizers, and metals and equipment. Additionally, it moves coal, coke, and iron ore to power plants, steel manufacturers, and industrial plants, and exports coal to deep-water port facilities.
On June 7, Wells Fargo began covering CSX Corporation (NASDAQ:CSX) with an Equal Weight rating and a $35.00 price target. The analyst highlighted CSX Corporation (NASDAQ:CSX) consistent performance and attractive lower multiple compared to peers, but noted its slower EPS growth. CSX Corporation (NASDAQ:CSX) is praised for its smooth operations and strong valuation alignment. UBS revised its price target to $44.00 with a Buy rating, while BMO Capital Markets maintained an Outperform rating and a $40.00 price target, citing strong operational execution. Recently, Anne Chow was elected to CSX Corporation (NASDAQ:CSX) board, enhancing its focus on growth and innovation. Chow brings with her a substantial background from her 32-year career at AT&T, with deep knowledge in technology and customer service. On April 17, CSX Corporation (NASDAQ:CSX) announced its latest quarterly earnings, reporting normalized earnings per share of $0.46, surpassing estimates by $0.01. The company also achieved revenue of $3.68 billion, exceeding expectations by $14.85 million. This strong financial performance highlights CSX Corporation (NASDAQ:CSX) effective operational strategies and solid market standing.
In the first quarter of 2024, the number of hedge funds with stakes in CSX Corporation (NASDAQ:CSX) increased to 70 from 61 in the previous quarter, according to Insider Monkey’s database. The combined value of these stakes is approximately $3.82 billion. Eric W. Mandelblatt’s Soroban Capital Partners emerged as the largest stakeholder among these hedge funds during this period.
06. United States Steel Corporation (NYSE:X)
Number of Hedge Funds Holders: 70
United States Steel Corporation (NYSE:X) manufactures and markets flat-rolled and tubular steel products, focusing primarily on markets in North America and Europe. Its operations are divided into segments: North American Flat-Rolled (Flat-Rolled), Mini Mill, U. S. Steel Europe (USSE), and Tubular Products (Tubular). On June 17, United States Steel Corporation (NYSE:X) revised its Q2 2024 guidance, expecting adjusted earnings per share of $0.76 to $0.80 and adjusted EBITDA of around $425 million, slightly lower than previous forecasts. CEO David B. Burritt cited stable domestic flat-rolled steel demand and variable spot steel prices for the adjusted EBITDA revision. The company highlighted restarting a blast furnace in Europe to meet increased customer demand and announced progress on new facilities aimed at meeting rising demand for sustainable steel. In another development, regulatory approvals for its transaction with Nippon Steel Corporation are nearly complete, expected to bring advanced technologies to enhance U.S. steel capabilities. On May 20, Jefferies began covering United States Steel Corporation (NYSE:X) stock, issuing a Buy rating along with a price target of $45.00. According to the firm’s analysis, United States Steel Corporation (NYSE:X) valuation is distinctively favorable compared to its peers, particularly highlighting that the company’s stock price is considerably lower than the accepted offer from Nippon. Jefferies believes this presents substantial upside potential for the stock.
During Q1, 2024 the count of hedge funds holding positions in United States Steel Corporation (NYSE:X) rose to 70 from 63 in the prior quarter, as reported by Insider Monkey’s database encompassing 920 hedge funds. These holdings collectively amount to around $2.38 billion. Matthew Halbower’s Pentwater Capital Management emerged as the leading shareholder among these hedge funds during this timeframe.
05. CRH plc (NYSE:CRH)
Number of Hedge Funds Holders: 75
CRH plc (NYSE:CRH) along with its subsidiaries, offers building materials solutions globally, operating through four main segments: Americas Materials Solutions, Americas Building Solutions, Europe Materials Solutions, and Europe Building Solutions. The company specializes in providing products and services for the construction and upkeep of public infrastructure, commercial properties, and residential buildings. CRH plc (NYSE:CRH) manufactures and sells aggregates, cement, ready-mixed concrete, and asphalt, and also offers paving and construction services as part of its comprehensive offerings. On June 17, Stephens initiated coverage of CRH plc (NYSE:CRH) with an Overweight rating and a price target of $95.00. RBC Capital also began covering shares of CRH plc (NYSE: CRH) with an Outperform rating on May 14, setting a price target of $110.00. The firm’s analysis indicates that CRH plc (NYSE:CRH) stands to benefit from concentrating its operations exclusively in North America.
In the first quarter of 2024, the number of hedge funds with stakes in CRH plc (NYSE:CRH) increased to 75 from 65 in the previous quarter, according to Insider Monkey’s database of 920 hedge funds. The combined value of these stakes is approximately $7.92 billion. Alexander Mitchell’s Scopus Asset Management emerged as the largest stakeholder among these hedge funds during this period.
L1 Long Short Fund stated the following regarding CRH plc (NYSE:CRH) in its first quarter 2024 investor letter:
“CRH plc (NYSE:CRH) (Long +25%) shares continued to rally strongly after the company delivered strong Q4 FY23 numbers and provided FY24 guidance ~5% ahead of consensus expectations. The company is a significant beneficiary of the exceptional growth in U.S. infrastructure spending which will underpin many years of robust demand. The Infrastructure Investment and Jobs Act (‘IIJA’), Inflation Reduction Act (‘IRA’) and the Chips and Science Act will together add roughly US$2 trillion in investment to ageing U.S. infrastructure. These market tailwinds, together with CRH’s ability to drive value-accretive M&A, position the company to deliver consistent double-digit earnings growth over the medium term.”
04. TransDigm Group Incorporated (NYSE:TDG)
Number of Hedge Funds Holders: 78
TransDigm Group Incorporated (NYSE:TDG) Incorporated designs, produces, and supplies aircraft components in the United States and internationally. In Q1 2024, the count of hedge funds holding stakes in TransDigm Group Incorporated (NYSE:TDG) rose to 78 from 65 in the previous quarter, based on Insider Monkey’s database of 920 hedge funds. These stakes collectively amount to around $6.62 billion in value. Mark Massey’s AltaRock Partners emerged as the largest stakeholder among these hedge funds during this period. On June 20, a Deutsche Bank analyst raised TransDigm Group Incorporated (NYSE:TDG) price target to $1,524 from $1,435, maintaining a Buy rating ahead of the company’s investor day next week. The adjustment reflects strategic developments such as the early CPI acquisition closure, Calspan unit divestiture, and Raptor Scientific acquisition, expected to bolster TransDigm Group Incorporated (NYSE:TDG) financial outlook. The analyst anticipates potential capital deployment of up to $18 billion for mergers and acquisitions over the next 10 quarters, estimating each $1 billion invested could generate about 2% equity value creation by the third year.
Mar Vista Focus strategy stated the following regarding TransDigm Group Incorporated (NYSE:TDG) in its first quarter 2024 investor letter:
“TransDigm Group Incorporated (NYSE:TDG) delivered another impressive quarter, exceeding analysts’ expectations for both earnings and profitability. Its gross and EBITDA margins widened significantly, driven by strong performances in commercial aerospace and defense. Revenue growth in commercial aerospace aftermarket parts (+27%) and new defense orders were key contributors to this outperformance. Management responded by raising the full-year 2024 forecasts for revenue and profitability.
Continued growth in both defense and commercial aftermarket should be fueled by recovering passenger traffic, higher aircraft utilization, and a strong bookings backlog. With domestic travel exceeding pre-pandemic levels and international travel nearing full recovery, TransDigm appears well-positioned for continuous growth. This, combined with its efficient operations, should drive long-term stock price appreciation.”
03. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Funds Holders: 87
Union Pacific Corporation (NYSE:UNP), through its subsidiary Union Pacific Railroad Company, operates as a major player in the U.S. railroad industry. The company provides transportation services for a wide range of products, including grain and grain products, fertilizers, food and refrigerated items, coal, and renewable resources. These services cater to various sectors such as grain processors, animal feeders, ethanol producers, and renewable biofuel producers. Additionally, Union Pacific Corporation (NYSE:UNP) transports construction materials, industrial chemicals, plastics, forest products, specialized items, metals, ores, petroleum, liquid petroleum gases, soda ash, sand, finished automobiles, automotive parts, and merchandise in intermodal containers.
On June 17, Union Pacific Corporation (NYSE:UNP) had its rating downgraded from Buy to Hold by Loop Capital, which also reduced the stock’s price target from $276 to $238. This downgrade is due to concerns about Union Pacific Corporation (NYSE:UNP) operational efficiency and cargo volumes, which are expected to remain weak in the near term. Loop Capital’s analyst highlighted that these issues are not fully accounted for in the current stock valuation, prompting the revised rating and price target. This adjustment signals a more cautious outlook for Union Pacific Corporation (NYSE:UNP) financial performance over the next year, potentially influencing investor decisions.
In the first quarter of 2024, the number of hedge funds with stakes in Union Pacific Corporation (NYSE:UNP) decreased to 87 from 90 in the previous quarter, according to Insider Monkey’s database. The combined value of these stakes is approximately $4.92 billion. Ken Fisher’s Fisher Asset Management emerged as the largest stakeholder among these hedge funds during this period.
02. Danaher Corporation (NYSE:DHR)
Number of Hedge Funds Holders: 98
Danaher Corporation (NYSE:DHR) ranks second on our list of best industrial stocks to buy according to hedge funds. During Q1, 2024 the count of hedge funds holding positions in Danaher Corporation (NYSE:DHR) rose to 98 from 90 in the prior quarter, as reported by Insider Monkey’s database encompassing 920 hedge funds. These holdings collectively amount to around $6.96 billion. Ken Fisher’s Fisher Asset Management emerged as the leading shareholder among these hedge funds during this timeframe.
Danaher Corporation (NYSE:DHR) announced that Executive Vice President Joakim Weidemanis will step down effective July 1, and will assist with the transition until September 30. The company and Weidemanis have a Transition Agreement ensuring he retains his current salary and is eligible for a pro-rated 2024 cash incentive compensation based on his target award. If terminated without cause during the transition, Weidemanis will receive his salary and pro-rated incentive for the entire period. Danaher Corporation (NYSE:DHR) reported strong Q1 results with $5.8 billion in revenue and $1.92 in adjusted diluted EPS, driven by growth in bioprocessing and subsidiary Cepheid. TD Cowen raised the stock target from $280 to $290, maintaining a Buy rating, reflecting confidence in Danaher’s Bioproduction, Diagnostics, and Life Sciences segments. Despite an expected slight revenue decline in 2024, Danaher Corporation (NYSE:DHR) remains optimistic about its long-term outlook.
RGA Investment Advisors stated the following regarding Danaher Corporation (NYSE:DHR) in its first quarter 2024 investor letter:
“In our Q3 2023 commentary, we featured a section on our investment in Danaher Corporation (NYSE:DHR) entitled “Purity in the Crown Jewel of Bioprocessing.” Specifically, we were speaking to Cytiva, Danaher’s bioprocessing business formed by the merger of Pall Corp and GE’s bioprocessing division. We will not repeat the features that attract us to bioprocessing in general, nor the elements of timeliness, though we will emphasize that our confidence in timeliness has actually increased since writing that piece. While Danaher has performed admirably ever since, its peer Sartorius, which was referenced by labeling bioprocessing “an oligopolistic market, with a small number of critical players and extremely high barriers to entry.”
01. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Funds Holders: 110
Topping our list of best industrial stocks to buy according to hedge funds is Thermo Fisher Scientific Inc. (NYSE:TMO). Thermo Fisher Scientific Inc. (NYSE:TMO) offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and biopharma services across North America, Europe, Asia-Pacific, and globally. On June 3, Jefferies analyst Tycho Peterson has initiated coverage on Thermo Fisher Scientific Inc. (NYSE:TMO) with a Buy rating and increased the price target from $600 to $650. In the first quarter of 2024, the number of hedge funds with positions in Thermo Fisher Scientific Inc. (NYSE:TMO) fell to 110 from 111, according to Insider Monkey’s database, which tracks 920 hedge funds. The combined value of these holdings is approximately $8.40 billion. During this period, Ken Fisher’s Fisher Asset Management became the largest shareholder among these hedge funds.
Polen Focus Growth Strategy stated the following regarding Thermo Fisher Scientific Inc. (NYSE:TMO) in its first quarter 2024 investor letter:
“We increased our positions in Thermo Fisher Scientific Inc. (NYSE:TMO), Visa, Zoetis, Nike, and Abbott Labs. Each of these companies is durable and available at attractive valuations, in our view, for the growth we see ahead. In fact, in the case of ThermoFisher, Nike, and Abbott Labs, we expect accelerating earnings growth in the back half of 2024 after more difficult earnings growth periods pass for each of these companies. ThermoFisher and Abbott will finally wind down most of their COVID-19 testing and vaccine-related efforts due to a lack of demand, so these should no longer be revenue growth headwinds.”
While we acknowledge the potential of TMO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
