In this article we present the list of 10 industrial stocks that are ‘must buys’ according to Caxton Associates. Click to skip ahead and see the 5 Industrial Stocks That Are Must Buys According to Caxton Associates.
General Electric Company (NYSE:GE), 3M Company (NYSE:MMM), and Aptiv PLC (NYSE:APTV) are some of the must-buy industrial stocks according to the experts at Caxton Associates.
Bruce Kovner’s Caxton Associates is a Princeton-based global macro hedge fund that was founded by Kovner in 1983. The billionaire money manager, whose personal wealth stands at $6.2 billion according to the latest data from Forbes, ran the fund for nearly three decades before retiring in 2011. He is currently the chairman of both Caxton and CAM Capital, which was founded a year after his retirement to manage his vast wealth.
Caxton uses a broad array of data points to inform its investment decisions, including macroeconomics, politics and policy, market technical indicators, as well as individual company assessments. Caxton Associates is in the midst of a strong run that has sent the fund’s assets under management soaring to more than $11 billion.
Caxton’s Macro fund gained a whopping 62% in 2020 and followed that up with 7.5% gains last year. Meanwhile, Caxton’s Global fund has also been tremendously successful, gaining 42% and 7.9% respectively in 2020 and 2021. Those stellar returns have allowed the fund to raise the Global fund’s performance and management fees to 25% and 2.25% respectively even as the broader hedge fund industry has generally been slashing its fees.
Caxton’s 13F portfolio was relatively small in comparison to its assets under management, being valued at just $1.23 billion on March 31. The fund executed a flurry of moves during the quarter, massively reshaping its portfolio away from tech stocks and finance stocks, which fell to 7% and 13% weighting respectively, compared to 20% and 22% a quarter earlier.
In their place, Caxton loaded up on consumer discretionary, materials, and industrials stocks, nearly doubling its 13F portfolio’s exposure to the latter. The fund is now more heavily invested in industrial stocks than it has been since the end of 2017.
With that in mind, let’s take a look at 10 industrial stocks that Caxton Associates considers must-buys.
Bruce Kovner of Caxton Associates LP
Our Methodology
The following data is gathered from Caxton Associates’ latest 13F filing with the SEC. We follow hedge funds like Caxton Associates because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2022 reporting period.
10 Industrial Stocks That Are Must Buys According to Caxton Associates
10. Astec Industries, Inc. (NASDAQ:ASTE)
Value of Caxton Associates’ 13F Position: $994,000
Number of Hedge Fund Shareholders: 10
General Electric Company (NYSE:GE), 3M Company (NYSE:MMM), and Aptiv PLC (NYSE:APTV) are among the must-buy industrial stocks according to Caxton Associates. The fund also built a new position in Astec Industries, Inc. (NASDAQ:ASTE) during the first quarter, buying 23,113 shares. Several hedge funds sold out of ASTE during Q4, including Caxton Associates, only to buy back into the stock during the first quarter. Among the other funds to do so were Ken Griffin’s Citadel Investment and Greg Eisner’s Engineers Gate Manager.
Astec Industries, Inc. (NASDAQ:ASTE) delivered strong first quarter results despite various headwinds during the quarter, including supply chain difficulties and an outbreak of Covid amongst its workforce. The equipment manufacturer, which specializes in road building and construction-related equipment, pulled in $0.41 in adjusted EPS during the quarter, beating estimates by $0.30. Revenue of $291.2 million also topped estimates.
Baird downgraded Astec Industries, Inc. (NASDAQ:ASTE) to ‘Neutral’ from ‘Outperform’ in early April, stating that the Ukraine war would drive up materials costs for machinery companies, particularly when it comes to steel, pinching or outright eliminating their margins. Baird also questioned whether the industry would see orders dwindle, though in the case of Astec, the company has record backlogs as of Q1.
9. Lockheed Martin Corporation (NYSE:LMT)
Value of Caxton Associates’ 13F Position: $1 million
Number of Hedge Fund Shareholders: 57
US House Members Have Huge Stakes in These 5 War Stocks, one of which is Lockheed Martin Corporation (NYSE:LMT). Caxton Associates also has a huge stake in the aerospace and defense company after buying 2,275 shares during Q1. After tumbling during Q4, hedge fund ownership of LMT rebounded close to all-time highs in the first quarter.
Speaking of backlogs, Lockheed Martin Corporation (NYSE:LMT) has an enormous one, at about $134 billion worth of contracts, which equates to close to two full years of revenue already lined up for the company. In the first quarter, Lockheed’s aeronautics division managed $6.4 billion in revenue, while its other three main divisions (space, rotary and mission systems, and missile and fire control) pulled in $8.7 billion.
Vltava Fund discussed some of the logistical challenges facing Lockheed Martin Corporation (NYSE:LMT) in the fund’s Q4 2021 investor letter:
“Of course, not all of our companies are doing better than we expected. Lockheed Martin Corporation (NYSE:LMT) fell somewhat short of our expectations last year. In the cases of Lockheed disruptions in the supply and logistics chains. Lockheed Martin Corporation (NYSE:LMT) uses a great many subcontractors from various countries and could not avoid issues with continuity of supplies. As a result, production will be slightly lower than we had expected.”
8. Honeywell International Inc. (NASDAQ:HON)
Value of Caxton Associates’ 13F Position: $1.1 million
Number of Hedge Fund Shareholders: 51
Caxton Associates more than doubled the size of its long position in Honeywell International Inc. (NASDAQ:HON) during the first quarter, amassing a total of 5,639 HON shares by the end of March. Ray Dalio’s Bridgewater Associates also grew its stake in the aerospace company more than twofold during Q1, owning 262,200 shares by the end of the quarter.
Honeywell International Inc. (NASDAQ:HON) is one of the rare industrial large-caps that is actually elevating its growth rates, as the company expects to grow at a 4% to 7% clip over the long-term compared to its previous forecasts of between 3% and 5% growth. Honeywell operates in a number of segments with long growth runways, including aerospace, internet of things, sustainable technology, and quantum computing.
Honeywell International Inc. (NASDAQ:HON)’s organic sales grew by just 1% during the first quarter, but the company does have a $28.5 billion backlog, which grew by 9% year-over-year. Honeywell also ranks as a Dividend Achiever, having raised its dividend payments for more than a decade. The company’s dividend payments yield a solid 2.23% annually.
7. Watts Water Technologies Inc. (NYSE:WTS)
Value of Caxton Associates’ 13F Position: $1.14 million
Number of Hedge Fund Shareholders: 23
Caxton Associates opened a new stake in Watts Water Technologies Inc (NYSE:WTS) during Q1, buying a total of 8,185 shares of the water solutions manufacturer. Alec Litowitz and Ross Laser’s Magnetar Capital also opened a new stake in the company during the March quarter. Hedge fund ownership of WTS jumped by 44% during Q4 of 2021 and remained flat during the latest quarter.
Watts Water Technologies Inc (NYSE:WTS) provides a broad line of plumbing, water control, and heating products. The company is focused on growing its margins, particularly in the Asia-Pacific region, where it believes higher volumes will soon help expand margins. For the second quarter, the company expects to achieve an adjusted operating margin of between 15.1% and 15.5%, up from 14.9% a year earlier.
Watts Water Technologies Inc (NYSE:WTS) topped revenue and EPS estimates in Q1, delivering $463 million in revenue and $1.63 in adjusted EPS. All three regions the company operates in enjoyed double-digit organic growth during the quarter. However, the company is guiding for just 3% to 8% organic sales growth for the year, given the uncertainty of the Ukraine war.
6. ITT Inc. (NYSE:ITT)
Value of Caxton Associates’ 13F Position: $1.39 million
Number of Hedge Fund Shareholders: 25
Closing out the first half of the list of industrial stock must buys according to Caxton Associates is ITT Inc. (NYSE:ITT), another company which the funded added to its portfolio during the quarter. Caxton bought 18,523 shares of the specialty components manufacturer in Q1, making it one of several hedge funds to build new stakes in the company. Hedge fund ownership of ITT rose by 32% during the first quarter.
ITT Inc. (NYSE:ITT)’s organic sales are expected to grow by about 10% this year, thanks in part to serving a diverse group of specialized end markets. The company took additional steps to branch out into new end markets in April when it bought cryogenic and hydrogen ball valve maker Habonim.
ITT Inc. (NYSE:ITT) is facing pressure on its bottom line from various fronts, including a rising U.S dollar, which impacted its sales by 2.8% in the first quarter. Cost of sales, marketing expenses, and general and administrative expenses all rose during the quarter as well. Despite that pressure, ITT was able to hike its quarterly dividend by 20% in February.
In the second part of this article, we’ll take a look at the conviction that Caxton Associates has in major industrial players like General Electric Company (NYSE:GE), 3M Company (NYSE:MMM), and Aptiv PLC (NYSE:APTV).
Click to continue reading and see the 5 Industrial Stocks That Are Must Buys According to Caxton Associates.
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Disclosure: None. 10 Industrial Stocks That Are Must Buys According to Caxton Associates is originally published at Insider Monkey.
