In this article, we will discuss the 12 best industrial distribution stocks to buy according to hedge funds.
2025: A Year of Tariffs and Uncertainty
A pressing concern looming over the United States currently is the potential impact of tariffs which have affected distributors as they encountered increased costs for imported goods.
While President Trump has already announced tariffs for Canada, Mexico, and China, CNBC reported that several short- to medium-term effects of this move include a slowdown in global economic growth slowing down, especially in nations with large manufacturing sectors, as well as higher prices for American consumers and higher-for-longer U.S. interest rates, and eventually a stronger USD. Among some of the sectors expected to be hit are industrials and manufacturing other than automotive, makers of chips and semiconductor equipment, consumer goods, Chinese e-retailers, and green energy.
Simultaneously, Trump imposed a 25% tariff on all steel and aluminum imports into the country. According to the New York Times, the effect of these tariffs would flow through to the users of metal goods. Items that are expected to get expensive include construction, housing, and appliances as well as cars, canned food, beer, and fizzy drinks. Amidst concerns regarding how these tariffs would deter development and rebuilding and negate the President’s agenda of making national housing affordable, the National Association of Home Builders has requested to exempt building materials from the tariffs.
With that being said, let’s move to the 12 best industrial distribution stocks to buy according to hedge funds.
A team of construction workers with their order of industrial supplies, on a construction site.
Our Methodology
In order to compile a list of the 12 best industrial distribution stocks to buy according to hedge funds, we used a stock screener to screen relevant stocks with the highest market caps. Moving on, we shortlisted the top 12 stocks from our list which had the highest number of hedge fund holders. The 12 best industrial distribution stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q3 2024.
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).
12 Best Industrial Distribution Stocks to Buy According to Hedge Funds
12. SiteOne Landscape Supply, Inc. (NYSE:SITE)
Number of Hedge Fund Holders: 18
SiteOne Landscape Supply, Inc. (NYSE:SITE) serves as the largest and only national wholesale distributor of landscape supplies in the US. The company’s customers include residential and commercial landscape professionals specializing in the design, installation, and maintenance of gardens, golf courses, lawns, and other outdoor spaces.
SiteOne is a clear market leader in wholesale landscape distribution, with over 700 branches and four distribution centers covering 45 US states and six Canadian provinces. The company offers a comprehensive selection of over 100,000 stock keeping units through an extensive North American network. Other than engaging in value-creating acquisitions, the company executes a compelling and sustainable growth strategy by fully exploiting its scale, resources, and capabilities as well as carrying out local market growth strategies. Simultaneously, SiteOne has significant room to grow across product lines.
The firm’s maintenance and new construction markets continue to be resilient. However, SiteOne Landscape Supply, Inc. (NYSE:SITE) encountered market headwinds with 3% price deflation and a weaker repair and remodel market in the third quarter of 2024, the firm was capable in achieving 2% Organic Daily Sales volume growth partially offsetting the price decline.
11. Fastenal Company (NASDAQ:FAST)
Number of Hedge Fund Holders: 25
Fastenal Company (NASDAQ:FAST) is a distributor of wide-ranging industrial and construction products. The company sells a broader range of industrial and construction supplies spanning over nine major product lines through a global network of in-market locations. Fastenal had 3,628 in-market locations in 25 countries at the end of 2024.
Fastenal is a leader in the wholesale distribution of industrial and construction supplies. The firm stands apart in its ability to support customers with local service, comprehensive technology, and consistent capabilities on a global scale, surpassing small distributors providing local service but limited technology and geographic reach as well as large suppliers with strong e-commerce platforms and national reach but limited local service.
The fourth quarter of 2024 marked a frustrating end to a challenging year for Fastenal, with a daily sales growth of 2.1%. Challenges resulting in the slow rate of growth included a soft manufacturing environment, low seasonal volumes, and many of the firm’s largest customers having sharp production cuts in late December during holiday-related plant shutdowns.
10. MSC Industrial Supply Co. (NYSE:MSM)
Number of Hedge Fund Holders: 26
MSC Industrial Supply Co. (NYSE:MSM) is a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. Through more than 2 million product offerings, deep expertise from over 80 years of working across industries, and its inventory management and other supply chain solutions, the company enables customers to drive greater productivity.
MSM is a leader in the North American industrial distribution market which is large and highly fragmented across the addressable market as well as the customer landscape, while the firm has ample opportunities for organic and acquisitive growth. The company boasts industry-leading customer satisfaction ratings, based on a customer-centric culture and delivering solutions driving customer success.
Although MSC Industrial Supply Co. (NYSE:MSM) was subject to a challenging operating environment during fiscal 2025 Q1, the company ended up delivering results exceeding its expectations. While the adjusted operating margin for the quarter exceeded the high end of the firm’s outlook by approximately 50 basis points, the company generated significant free cash flow of $82 million.
9. Applied Industrial Technologies, Inc. (NYSE:AIT)
Number of Hedge Fund Holders: 27
Applied Industrial Technologies, Inc. (NYSE:AIT) is a value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies.
AIT serves as one of the largest distributors and service providers of industrial motion and control technologies globally. The company occupies a leading position within critical areas of the industrial supply chain, with its scale and technical expertise in motion, power, and control technologies driving a strong competitive moat. Simultaneously, the firm is uniquely positioned to advantage of emerging growth related to next-generation automation and smart technologies.
In a large and fragmented market, Applied Industrial Technologies, Inc. (NYSE:AIT) has been a proven acquirer as evidenced by 36 acquisitions since 2012 representing more than $1 billion in annual sales. In January, the firm successfully completed the acquisition of Hydradyne which marked a major milestone and set the stage for a solid growth and operational momentum. While Hydradyne is a premier provider of fluid power solutions, the acquisition is to potentially improve AIT’s leading fluid power distribution position in the United States.
8. Pool Corporation (NASDAQ:POOL)
Number of Hedge Fund Holders: 32
Pool Corporation (NASDAQ:POOL) is a wholesale distributor of swimming pool equipment, parts and supplies, and related outdoor living products. The company operates approximately 440 sales centers in North America, Europe, and Australia and distributes over 200,000 products from more than 2,200 vendors to 125,000 wholesale customers.
Pool Corporation has the privilege of being one of the leaders in the highly fragmented swimming pool industry and serves as the largest wholesale distributor of swimming pool supplies, equipment, and related leisure products worldwide. The leader has demonstrated a solid history of market share expansion and organic growth. It is worth mentioning that POOL has driven compound average annual shareholders’ return of more than 29% since its IPO in October 1995.
Warren Buffett’s Berkshire Hathaway took stakes in Pool Corporation (NASDAQ:POOL) in the third quarter, adding a 404,000-share stake, worth $152 million to its portfolio.
7. Resideo Technologies, Inc. (NYSE:REZI)
Number of Hedge Fund Holders: 33
Resideo Technologies, Inc. (NYSE:REZI) is a manufacturer and distributor of technology-driven products and solutions offering comfort, security, energy efficiency, and control to customers globally. Resideo operates in two segments, Products and Solutions, and ADI Global Distribution.
While Products and Solutions is a leading global provider of home air, water, security, and energy products and solutions, ADI is a leading global wholesale distributor of security, fire, AV, and other low-voltage products. The company boasts differentiated professional and channel relationships, driving repeat business with the homeowner. Resideo has exposure to attractive secular trends including connected home, home energy management, residential life safety, and energy delivery transitions. The firm has a solid presence in over 150 million homes, with 15 million systems installed in homes every year.
The business momentum has been robust, with both segments achieving year-over-year organic revenue growth in Q3 2024, the first time since the second quarter of 2022. While improving demand trends in key categories and cross-selling opportunities are driving significant benefits in ADI, Products and Solutions witnessed organic revenue growth based on strength in retail, HVAC, and electrical distribution.
6. W.W. Grainger, Inc. (NYSE:GWW)
Number of Hedge Fund Holders: 34
W.W. Grainger, Inc. (NYSE:GWW) is a broad line, distributor of maintenance, repair and operating (MRO) products and services with operations in North America, Japan, and the United Kingdom. The firm operates through two segments, High-Touch Solutions North America (High-Touch Solutions N.A.) segment which primarily includes the Grainger-branded businesses in the US, Canada, Mexico, and Puerto Rico, and the Endless Assortment segment which includes the firm’s Zoro Tools, Inc. (Zoro) and MonotaRO Co., Ltd. (MonotaRO) online channels operating predominately in the US and Japan.
Grainger is an industry leader in a large and highly attractive market with the opportunity to capture market share. A world-class supply chain and a massive scale deem the company a significant player in industrial distribution. Grainger offers approximately 2 million maintenance, repair and operating (MRO) products and services in the High-Touch Solutions segment while the Endless Assortment segment boasts Zoro.com offering customers access to over 14 million products, and MonotaRO.com offering over 24 million products.
W.W. Grainger, Inc. (NYSE:GWW) advanced its capabilities and deepened its customer relationships across both of its segments through a challenging 2024 where demand remained muted. Total company sales increased 4.2% year over year for the full year 2024. Additionally, Grainger generated a strong operating cash flow of over $2.1 billion and returned $1.6 billion to shareholders through dividends and share repurchases.
5. Watsco, Inc. (NYSE:WSO)
Number of Hedge Fund Holders: 37
Watsco, Inc. (NYSE:WSO) is a distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies in the HVAC/R distribution industry in the Americas. The firm offers indoor comfort to homes and businesses despite the conditions with its extensive distribution network.
Watsco has crafted a national network of the finest HVAC distribution businesses in the United States and abroad for over 30 years. The firm serves as the largest and best-capitalized distributor of HVAC/R products in the industry through its business units positioning itself as a market leader in a highly fragmented North American HVAC/R market industry. The firm claims that it offers services on a local basis to more than 375,000 owner-operators, technicians, and installers annually.
As part of its solid growth strategy, Watsco has engaged in acquiring long-standing, family-owned businesses and has acquired eight businesses since August 2019, generating approximately $1 billion in annual sales now.
4. Core & Main, Inc. (NYSE:CNM)
Number of Hedge Fund Holders: 41
Core & Main, Inc. (NYSE:CNM) is a distributor of water, sewer, storm drain, and fire protection products in the US. The company is based in St. Louis and has more than 350 branches in the country.
Core & Main operates as a leader in advancing reliable infrastructure with local service, across the nation. Other than having a leading position with size and scale in a highly fragmented market, the company boasts differentiated service offerings enhanced by proprietary technology tools. Core & Main continues to move forward by compounding growth through M&A. The firm expanded its presence in key geographies and gained access to new product lines by completing five acquisitions during and after 2024’s third quarter.
According to Steve LeClair, chair and CEO of Core & Main, Inc. (NYSE:CNM), the company can grow in any environment as evidenced by its strong 2024 third-quarter performance. Net sales in the quarter rose 11.5% over the year, driven by acquisitions and higher end-market volumes partially offset by slightly lower selling prices.
3. Beacon Building Products (NASDAQ:BECN)
Number of Hedge Fund Holders: 47
Beacon Building Products (NASDAQ:BECN) is a provider of commercial and residential roofing, windows, decking, insulation, siding, specialty lumber, waterproofing, and air barrier systems to the North American building industry.
The firm is well positioned in the large and fragmented roofing and complementary products distribution market which provides multiple paths to growth. Beacon serves as the largest publicly traded distributor of roofing materials and complementary building products in the United States and Canada while being one of the oldest and most established distributors in the industry. The industry dynamics tend to be favorable with more than 70% of revenue driven by repair and remodel demand.
Recently, a Hold rating on Beacon Building Products (NASDAQ:BECN) was reiterated by Keith Hughes from Truist Financial. Previously on February 4, RBC Capital maintained a Buy rating on the stock and set a price target of $130.
2. WESCO International, Inc. (NYSE:WCC)
Number of Hedge Fund Holders: 50
WESCO International, Inc. (NYSE:WCC) is a provider of business-to-business distribution, logistics services, and supply chain solutions. The company has operating segments comprising three strategic business units consisting of Communications & Security Solutions, Electrical & Electronic Solutions, and Utility & Broadband Solutions.
WESCO International, Inc. (NYSE:WCC) serves as a leading supply chain solutions provider with global capabilities. The company offers seamless end-to-end support from concept, to design, to deployment with an unmatched services portfolio, industry-leading brands, and deep industry expertise. Based on the secular trends of AI-driven data centers, rising power generation and demand, electrification, IoT/automation, and reshoring, the company is positioned well to deliver outsized growth.
2024 set the stage for the company’s growth in 2025. Factors contributing to this included record free cash flow generation of over $1 billion exceeding expectations, portfolio strengthened through three services-based acquisitions and Wesco Integrated Supply divestiture, as well as a stable gross margin. Profitable growth in all three business units in 2025.
1. Ferguson Enterprises Inc. (NYSE:FERG)
Number of Hedge Fund Holders: 62
Ferguson Enterprises Inc. (NYSE:FERG) is the largest value-added distributor catering to the specialized professional in its $340 billion residential and non-residential North American construction market. Ferguson is an integral part of repair, maintenance, and improvement as well as new construction projects.
Ferguson has leading positions in large, growing, and fragmented North American markets including HVAC, residential building and remodel, waterworks, and residential trade plumbing, among others. Simultaneously, the firm’s ability to deploy scale locally delivers sustainable market outperformance. The track record of outperformance and cash generation stands robust, with revenue and adjusted operating profit CAGR of +49% and +78% between FY20 and FY24.
Kevin Murphy, Ferguson CEO, exclaimed his confidence in the firm’s continued market outperformance and pointed to the bright company’s prospects in the Q1 FY2025 earnings call as he stated:
“We expect to continue to outperform our markets as we leverage multiyear structural tailwinds. Our size, scale, and strategy, we believe we are well positioned to take advantage of opportunities in the underbuilt and aging US housing market, nonresidential large capital projects, and the growing demand for plumbing and HVAC specialized professionals”
While we acknowledge the potential of FERG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than FERG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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