In this article, we discuss the 10 best industrial stocks to buy right now. If you want to skip our detailed analysis of the industrial sector and these stocks, go directly to the 5 Best Industrial Stocks To Buy Right Now.
The industrial sector, also known as the secondary sector of an economy, transforms raw materials into finished products for the end user, deploying heavy machinery, designated production processes, and copious amounts of energy. Some of the most popular and in-demand industrial sectors are automobiles, chemicals, consumer electronics, industrial and steel equipment, aerospace, and energy.
Due to the COVID-19 pandemic, the industrial sector was among those segments of the economy that were heavily hit. The global supply chain disruption caused a severe shortage of raw materials, which halted manufacturing processes worldwide. Demand for automobiles, aerospace, consumer electronics, and industrial equipment dipped sharply, as people were experiencing unemployment and a lack of funds to spend on non-essential products. Similarly, lower B2B demand was experienced in the industrial sector as a result.
However, the impressive rate of vaccine distribution, fiscal stimulus packages, reopening of marketplaces, and the controlled level of COVID-19 cases have encouraged economic growth in 2021. Pent-up demand resulted in boosted in-store sales when establishments were allowed to reopen. As a result of continuing economic recovery, the US GDP in Q4 2020 grew by 4.3%, and the GDP increased by 6.4% in Q1 2021.
According to Deloitte US, production and order levels are still low as compared to the 2019 levels, but the trajectory of the decline has slowed. Total industrial capacity utilization was 74.5% in December, up from 64.1% in April. However, it’s still below pre-pandemic levels of 77%.
It will take some time for the industrial sector to bounce back from the reeling effects of the global COVID-19 pandemic, but it is on the right path. Some of the most notable industrial stocks include FedEx Corporation (NYSE:FDX) and Union Pacific Corporation (NYSE:UNP), among others discussed in detail below. These stocks are quite popular among the hedge funds as well.
Why should we pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Our Methodology
With this context in mind, let’s dive into the 10 best industrial stocks to buy right now. We selected stocks that were sought-after by the hedge funds, had mostly positive analyst ratings, and took factors like fundamental business strengths, earnings, and past performance in account as well. We ranked these stocks according to their popularity among the hedge funds.
Best Industrial Stocks To Buy Right Now
10. Deere & Company (NYSE:DE)
Number of Hedge Fund Holders: 52
Deere & Company (NYSE:DE) is an American manufacturer of agricultural machinery, heavy equipment, forestry equipment, diesel equipment, and lawn care equipment, also recognized by its brand name, John Deere. Deere & Company (NYSE:DE) is also a Fortune 500 Company that provides financial services as well. It is one of the best industrial stocks to buy now.
Ken Fisher’s Fisher Asset Management is the largest stakeholder in Deere & Company (NYSE:DE), with 158,829 shares worth roughly $53.2 million. Overall, 52 hedge funds tracked by Insider Monkey were bullish on Deere & Company (NYSE:DE) at the end of June, up from 51 in Q1.
BofA analyst Ross Gilardi kept a Buy rating on Deere & Company (NYSE:DE) and a price target of $425 on October 14, despite the strike by 10,000 UAW Deere members, which according to Gilardi has limited chances of continuation.
Here is what Harding Loevner has to say about Deere & Company (NYSE:DE) in its Q2 2021 investor letter:
“In the US, where we increased our weight as part of our recent portfolio manager transition, two of our industrial holdings stood out (one is) John Deere. John Deere delivered stronger-than-expected quarterly earnings and raised its guidance for the full-year. Sales of Deere’s tractors and combine harvesters are underpinned by Chinese demand for agriculture products and the bioethanol market rebounding with oil prices.”
9. Raytheon Technologies Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 53
Raytheon Technologies Corporation (NYSE:RTX) is a multinational American aerospace and defense conglomerate, one of the largest companies in this sector based on revenue and market capitalization. Raytheon Technologies Corporation (NYSE:RTX) is engaged in the production of aircraft engines, avionics, aero-structures, guided missiles, air defense systems, satellites, and drones. Specializing in cybersecurity, Raytheon Technologies Corporation (NYSE:RTX) is a leading military contractor, which also makes it one of the best industrial stocks to buy now.
At the end of June, 53 hedge funds reported owning stakes in Raytheon Technologies Corporation (NYSE:RTX), with Ken Fisher’s Fisher Asset Management being the largest stakeholder, owning 7.16 million shares worth $616.2 million.
Wells Fargo analyst Matthew Akers kept an Equal Weight rating on Raytheon Technologies Corporation (NYSE:RTX), raising the price target to $97 from $91 on October 24. Akers stated that the Q3 results for Raytheon Technologies Corporation (NYSE:RTX) met his expectations, and the company has a positive outlook for the 2022.
Raytheon Technologies Corporation (NYSE:RTX) is a top industrial stock to purchase now, just like FedEx Corporation (NYSE:FDX) and Union Pacific Corporation (NYSE:UNP).
Here is what ClearBridge Investments has to say about Raytheon Technologies Corporation (NYSE:RTX) in its Q2 2021 investor letter:
“Broader market leadership was a relative benefit for the ClearBridge Large Cap Value Strategy, which outperformed the Russell 1000 Value Index in the second quarter… Separately, Raytheon Technologies benefited from an improving health outlook that is contributing to a faster than anticipated recovery in air travel, which should drive stronger results for Raytheon’s commercial aerospace business.”
8. TransDigm Group Incorporated (NYSE:TDG)
Number of Hedge Fund Holders: 57
TransDigm Group Incorporated (NYSE:TDG) is an Ohio-based aerospace manufacturing company, which engineers several aerospace components, including audio systems, ignition systems, engine sensors, aircraft hardware, cockpit security systems, and power conditioning, among others.
At the end of June, 57 hedge funds in Insider Monkey’s elite database were bullish on TransDigm Group Incorporated (NYSE:TDG).
RBC Capital analyst Ken Herbert on October 22 kept an Outperform rating on TransDigm Group Incorporated (NYSE:TDG), with a price target of $700. The analyst predicts that TransDigm Group Incorporated (NYSE:TDG) stock will experience 20% growth in the commercial aftermarket business in FY22.
Like FedEx Corporation (NYSE:FDX) and Union Pacific Corporation (NYSE:UNP), TransDigm Group Incorporated (NYSE:TDG) is a popular industrial stock to buy now.
Here is what Vulcan Value Partners has to say about TransDigm Group Incorporated (NYSE:TDG) in its Q2 2021 investor letter:
“TransDigm Group Inc., another material contributor during the quarter, is an aerospace manufacturer providing highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Its business was impacted by the global pandemic; however, the company has been able to maintain margins despite strong revenue headwinds, and it continues to generate strong free cash flow.”
7. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 58
Lockheed Martin Corporation (NYSE:LMT) is an American corporation that is operating in multiple sectors, including aerospace, weapons, information technology, and information security. Lockheed Martin Corporation (NYSE:LMT) is one of the largest companies operating in the industrial sector, providing crucial military support and security services. The technology division at Lockheed Martin Corporation (NYSE:LMT) is working with NASA, being the primary contractor for the Orion command module. It is one of the top industrial stocks to invest in.
At the end of the second quarter, 58 hedge funds in Insider Monkey’s database of elite funds were bullish on Lockheed Martin Corporation (NYSE:LMT), up from 50 in the previous quarter.
The company received contracts worth $5.1 billion as of September, and increased dividends by about 8%. Analysts are also positive that the space division at Lockheed Martin Corporation (NYSE:LMT) has immense growth potential.
RiverPark Advisors mentioned Lockheed Martin Corporation (NYSE:LMT) in its Q4 2020 investor letter. Here is what they said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
6. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 59
The Boeing Company (NYSE:BA) is a multinational corporation manufacturing airplanes, missiles, rockets, satellites, and rotorcrafts, among other aerospace and defense equipment. The Boeing Company (NYSE:BA) is one of the largest aerospace manufacturers worldwide. The four main business divisions at the Chicago-based The Boeing Company (NYSE:BA) include Boeing Commercial Airplanes, Boeing Defense, Space & Security, Boeing Capital, and Boeing Global Services. The Boeing Company (NYSE:BA) is one of the top industrial stocks to buy right now.
As of June this year, 59 hedge funds tracked by Insider Monkey’s database of 873 elite funds reported owning stakes in The Boeing Company (NYSE:BA).
Susquehanna analyst Charles Minervino, on October 28, kept a Positive rating on The Boeing Company (NYSE:BA). He stated that The Boeing Company (NYSE:BA) is positioned to experience strong cash flow and earnings growth once international travel restrictions are lifted.
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Disclosure: None. 10 Best Industrial Stocks To Buy Right Now is originally published on Insider Monkey.
