In this article, we will discuss the 10 Best Industrial Stocks to Invest in Now.
Industrial stocks were on a roll in 2024 as the overall sector ended the year up 26% on navigating deteriorating economic conditions, geopolitical uncertainty and heightened inflation. At the same time, a slowing Chinese economy was expected to hurt sentiments in the sector, but that was not the case.
Fast forward, the outlook in the industrial sector remains optimistic despite growing concerns about trade tariffs that could affect deals and operations. US President Donald Trump has threatened to impose a new 25% tariff on all steel and aluminum imports.
Trump’s trade policy overhaul would involve a significant increase in tariffs on top of the current metals duties. According to data from the American Iron and Steel Institute and the government, South Korea, Vietnam, Brazil, and Canada are the top three countries from which the United States imports steel. As a result, the tariffs have the potential to shake the nation’s industrial sector.
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“Canadian steel and aluminum support key industries in the U.S. from defense, shipbuilding and auto. We will continue to stand up for Canada, our workers, and our industries,” Canadian Innovation Minister Francois-Philippe Champagne posted on X.
Nevertheless, there is growing optimism that a return of manufacturing to the US from other countries amid the trade tariffs would be a boon for the sector. Activities in the industrial sector are expected to improve significantly amid the growing push to reinvest in domestic infrastructure.
The need to bring supply chains onshore to avert the ever-growing geopolitical risk is another factor that should bolster sentiments in the industrial sector. Additionally, heightened investments in electrification and the development of artificial intelligence should also have a positive impact. The fact that only a quarter of the $1.9 trillion worth of projects announced since 2020 have entered into the construction phase underscores the tremendous opportunities around industrial stocks.
The expected surge in spending on domestic manufacturing under the new administration should greatly benefit equipment rental specialists’ electrical equipment companies, among others. The commercial aerospace sector is another segment expected to be on a roll after years of slowdown following the COVID-19 pandemic. A shortage of new planes as travel recovers is presenting tremendous opportunities for companies in the aerospace segment.
Interest rate cuts as part of an effort to steer the economy into a soft landing is another tailwind that should positively impact the industrial sector in 2025. Lower interest rates are expected to stimulate the housing sector on mortgage dropping, therefore attracting more home buyers. The net effect should be a strong demand for building materials and equipment that benefit construction companies and those in the repair and remodeling business.
Additionally, the industrial sector could receive a significant boost from China coming through on a new economic stimulus and major structural changes. Such a move is expected to boost activities in the sector and increase demand for raw materials and equipment, which should bolster the industrial sector.
“The sentiment around the China market obviously has been pretty poor, not just recently, but for some time now. I think investors are ignoring some of these positive developments,” said Andrew Swan, head of Asia equities at Man Group
Trump’s trade policies, lower interest rates, and China’s economic stimulus are some of the tailwinds likely to impact the global industrial sector positively. A resilient US and global economy that steers clear of recession amid low interest rates are some of the reasons to be optimistic about the overall industrial sector outlook.
Stock market data. Photo by Jakub Zerdzicki on Pexels
Our Methodology
We scanned the US stock market using a screener and analyzed online rankings to compile the list of the 10 best industrial stocks to invest in now. We filtered out those with high hedge fund holdings from an initial list of 25-30 stocks. The final stocks are arranged in ascending order of hedge fund sentiments as of Q3 2024. We also focused on stocks with strong fundamentals and significant long-term investment potential.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Industrial Stocks to Invest in Now
10. Deere & Company (NYSE:DE)
Number of Hedge Fund Holders: 41
Deere & Company (NYSE:DE) is an industrial company that manufactures and distributes equipment worldwide. It provides large and medium tractors, cotton pickers and strippers, sugarcane harvesters and loaders. While the stock underperformed the overall market on rallying by 20% in 2024, it is already up by 11%.
Even as Deere & Company (NYSE:DE) faced significant market challenges in 2024, it adjusted its business operations and performed structural improvements to serve customers effectively and achieve strong results. Likewise, it generated a net income of $7.1 billion and earnings of $25.62 per diluted share for fiscal 2024, as net sales dropped 28% to $11.14 billion.
In order to manage used equipment stocks, the company is collaborating closely with dealers and has drastically decreased its inventory of new equipment. Technological innovations have been widely adopted, such as the See and Spray technology, which covers more than one million acres, as Deere looks to strengthen its long-term prospects. Additionally, Deere & Company (NYSE:DE) has a big global business edge that should allow it to shrug off the negative effects of US trade tariffs.
Parnassus Investments, an investment management company, released the Q2 2024 investor letter. Here is what the fund said:
“Deere & Company (NYSE:DE) stock dropped after the company released underwhelming fiscal second-quarter earnings and lowered its 2024 guidance. Although the company is going through an equipment demand downturn, we believe it will demonstrate better-than-expected through-cycle performance.”
9. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 50
Caterpillar Inc. (NYSE:CAT) is an industrial company that manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. As a cyclical investment play, the company benefits whenever spending on construction, mining, energy, and transportation equipment increases.
Likewise, Caterpillar Inc. (NYSE:CAT) finds itself on edge with Donald Trump threatening a 25% tariff on goods from Mexico and Canada, whereby it maintains significant operations. Restrictive trade tariffs have the potential to affect Caterpillar’s core business. However, chief executive officer Donald Umpleby believes the company is well positioned to shrug off the negative trade policies given that the company maintains the largest manufacturing presence in the US. Additionally, it generates nearly half of its revenues in North America.
Caterpillar Inc. (NYSE:CAT) has shown excellent margin performance in spite of difficulties with sales volume, suggesting superior cost control and operational efficiency. In comparison to earlier projections, analysts are projecting a 60 basis point boost in margins for the second half of 2025, which would help the full-year EPS. Significant destocking initiatives are also being pursued, with plans to cut inventory by $1 billion by the second half of 2025.
Diamond Hill Capital, an investment management company, released its “Large Cap Strategy” third-quarter 2024 investor letter. Here is what the fund said:
“Other top Q3 contributors included HCA Healthcare and Caterpillar Inc. (NYSE:CAT). Heavy construction machinery manufacturer Caterpillar has held up better than industry peers against a challenging macroeconomic backdrop and a generally slowing construction environment.”