Earlier on February 26, Liz Ann Sonders, Charles Schwab chief investment strategist, joined CNBC’s ‘Squawk on the Street’ to discuss how manufacturing could stall due to the ongoing policy uncertainty. She thinks that the current market sentiment is focused on concerns about economic growth more than on inflation. Sonders noted a list of weakening indicators, such as consumer sentiment surveys, retail sales, and services PMI figures. She emphasized that rising policy uncertainty also manifests in reduced intentions to purchase large capital goods and causes a pullback in capital expenditures and spending plans. Sonders explained that, over the past year, market yields have alternated between responding primarily to inflation data and growth signals, both during periods of increases and declines. She thinks that the recent downward movement in yields is driven by worries about slowing growth more than by expectations of declining inflation. This has led investors to favor more defensive sectors within the market, which reflects a broader sense of caution.
Recent PMI data has shown services activity starting to decline, but manufacturing has picked up. This could result in a potential positive convergence between the two sectors. But Sonders thinks that this improvement in manufacturing could be at risk due to the policy-related uncertainty still ongoing. Therefore, many companies within the manufacturing sector are now increasingly cautious about future investments and expansion. Sonders also pointed out that while there have been discussions about significant deficit reductions, originally targeting $2 trillion, the actual figures are much smaller. The current visible cuts amount to less than $10 billion. She argued that it is premature to focus on these spending cuts alone, as the effects of tariffs, immigration, and deportation policies, and regulatory changes are collectively putting downward pressure on growth estimates and upward pressure on inflation expectations. She added that while tax policy changes are being discussed, these are more likely to affect the year-end outlook rather than the near-term trajectory.
The manufacturing sector, despite showing signs of recovery and improvement, remains vulnerable to the broader environment of policy uncertainty and shifting macroeconomic conditions. That being acknowledged, we’re here with a list of the 15 small-cap manufacturing stocks hedge funds are buying.
A warehouse storing electronic components and other materials used for manufacturing services.
Our Methodology
We first sifted through financial media reports, iShares U.S. Manufacturing ETF, Vanguard Industrials ETF, and Insider Monkey’s Q4 2024 hedge funds database reports to compile a list of the small-cap manufacturing stocks hedge funds are buying. For this article, we define small-cap stocks as those that trade between $10 billion and $20 billion, as of April 25. We then selected the top 15 stocks and ranked them in ascending order of the number of hedge funds that have stakes in them. In cases where an equal number of hedge funds held two or more stocks, we used the market cap as a tiebreaker.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
15 Small-Cap Manufacturing Stocks Hedge Funds Are Buying
15. Textron Inc. (NYSE:TXT)
Market Capitalization as of April 25: $12.35 billion
Number of Hedge Fund Holders: 29
Textron Inc. (NYSE:TXT) manufactures, sells, and services different aircraft for the defense, industrial, and commercial businesses. It has six segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance. The Bell segment manufactures and supplies military and commercial helicopters, tiltrotor aircraft, and related spare parts and services.
The Bell segment’s revenue reached $983 million in Q1 2025, which was a 35% increase year-over-year. On the military side, Bell grew due to the execution of the Future Long-Range Assault Aircraft (FLARA) program and strengthened military support programs. As the FLARA program progresses, the focus for 2025 includes design maturation and achieving other related deliverables.
On the commercial side, Textron Inc. (NYSE:TXT) delivered 29 helicopters in Q1 2025, which was an increase from the 18 delivered in Q1 2024. Bell secured a contract for 5 additional CMV-22 aircraft and extended production through 2027. Furthermore, Bell announced a purchase agreement with Air Methods for 15 IFR-configured 407 GXIs with an option for 12 more. Deliveries for this are slated to begin later in 2025.
14. Snap-On Inc. (NYSE:SNA)
Market Capitalization as of April 25: $16.15 billion
Number of Hedge Fund Holders: 32
Snap-On Inc. (NYSE:SNA) manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions. It operates through the Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. It serves several industries that range from aviation & aerospace to infrastructure construction.
The company made a total revenue of $1.14 billion in Q1 2025. Although this was a ~3.5% decline year-over-year, Snap-on’s RSNI (Repair Systems & Information) segment grew its sales by ~3.7% in this quarter, which was driven by RSNI’s software-packed offerings. Notably, software sales within the segment grew at a higher rate than the overall increase in RSNI revenue.
The consistent performance of this segment positions RSNI as a growth engine and profit center for Snap-On Inc. (NYSE:SNA). RSNI’s products are also becoming increasingly effective due to their ability to use their database, which is further enhanced by the integration of AI. AI facilitates the translation of technicians’ natural language descriptions of repairs into the database more efficiently.
Ariel Focus Fund stated the following regarding Snap-on Incorporated (NYSE:SNA) in its Q4 2024 investor letter:
“Tool innovator, Snap-on Incorporated (NYSE:SNA) was the top contributor to performance in the period as the company continues to effectively navigate the growing complexity of the automotive repair industry. Amidst a challenging macro backdrop, SNA began redirecting product design, capacity and marketing efforts towards more affordable hand tools resulting in a sequential improvement in quarterly sales and gross margin expansion. We believe these results highlight SNA’s differentiated value proposition to its end markets, particularly as it continues to respond to real-time feedback and invest in new products to service unique needs of original equipment manufacturers. In our view, the automotive repair industry sports a favorable runway due to aging vehicles and the increased technological complexity associated with repair.”
13. IDEX Corp. (NYSE:IEX)
Market Capitalization as of April 25: $13.07 billion
Number of Hedge Fund Holders: 34
IDEX Corp. (NYSE:IEX) manufactures a range of products through three segments: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FSDP). For instance, the company designs, manufactures, and distributes positive displacement pumps, valves, small volume provers, flow meters, injectors, and other fluid-handling pump modules and systems.
The company’s HST segment achieved an 8% organic order growth in Q4 2024, which was the highest among all IDEX segments. For the entirety of 2024, HST reported high single-digit organic order growth, which was driven by year-end blanket orders within the pneumatics and life sciences sectors. A blanket order refers to a long-term agreement with a supplier to purchase some goods/services over a specified period, often at a pre-determined price.
During Q4, IDEX executed several impactful projects within the HST segment, specifically targeting the pharmaceutical, global broadband satellite communications, and energy transition industries. For 2025, IDEX Corp. (NYSE:IEX) projects HST to be its top-performing segment in terms of organic growth and anticipates it to be near the high end of IDEX’s overall growth guidance range of 1% to 3%.
Weitz Large Cap Equity Fund stated the following regarding IDEX Corporation (NYSE:IEX) in its Q3 2024 investor letter:
“We continued to increase the Fund’s positions in Global Payments and IDEX Corporation (NYSE:IEX). during the quarter. Both stocks trade at significant discounts to our business value estimates. The companies have fundamental catalysts that could drive the stocks, but the timetable may have slipped a bit. The challenge is that investors want results now, especially in a bull market. We have specific milestones to track, and we think their achievement can be measured in quarters rather than years. In our view, the potential payoffs are well worth the wait.”
12. Woodward Inc. (NASDAQ:WWD)
Market Capitalization as of April 25: $10.8 billion
Number of Hedge Fund Holders: 35
Woodward Inc. (NASDAQ:WWD) designs, manufactures, and services control solutions for the aerospace and industrial markets. It operates through two segments: Aerospace and Industrial. Its products are used on commercial and private aircraft & rotorcraft, as well as on military fixed-wing aircraft & rotorcraft, guided weapons, and other defense systems.
Wooward’s Aerospace segment made a $494 million revenue in Q1 2025, which was up 7% year-over-year. While commercial OEM sales declined by 10% due to a pause in deliveries of certain product lines to Boeing, this impact was offset by growth in other areas. For instance, commercial aftermarket sales surged by 19%, defense OEM sales increased by 21%, and defense aftermarket sales grew by 8%.
The Aerospace segment’s earnings for Q1 reached $95 million, which was 19.2% of segment sales. Woodward Inc. (NASDAQ:WWD) now has demand from airframe and engine OEMs, which indicates growth in the aerospace market. Woodward is preparing to meet this demand through actions like direct labor hiring and close collaboration with suppliers to address any ongoing supply chain challenges.
11. Lincoln Electric Holdings Inc. (NASDAQ:LECO)
Market Capitalization as of April 25: $10.41 billion
Number of Hedge Fund Holders: 36
Lincoln Electric Holdings Inc. (NASDAQ:LECO) designs, develops, manufactures, and sells welding, cutting, and brazing products. It operates in three segments: Americas Welding, International Welding, and The Harris Products Group. It serves general fabrication, oil & gas, power generation, process, automotive & transportation, and construction & infrastructure industries.
The Harris Products Group’s sales rose by 11% in Q4 2024 year-over-year due to its leadership in the metalworking products. However, the company’s total revenue amounted to $1.02 billion in Q4, which was a ~3.5% decline from the year-ago period. In 2025, Lincoln Electric Holdings Inc. (NASDAQ:LECO) expects low single-digit sales growth.
The Harris Products Group’s growth in Q4 was fueled by higher pricing, increased sales volumes (especially through the retail channel), and the continued growth in the HVAC (Heating, Ventilation, and Air Conditioning) market. This helped offset the softness in industrial sector applications as well.
10. ITT Inc. (NYSE:ITT)
Market Capitalization as of April 25: $11.12 billion
Number of Hedge Fund Holders: 36
ITT Inc. (NYSE:ITT) manufactures and sells engineered critical components and customized technology solutions for the transportation, industrial, and energy markets. The company’s Motion Technologies segment manufactures items like brake pads, shock absorbers, energy absorption components, and damping technologies primarily for the transportation industry.
In 2024, the company’s IP (Industrial Process) segment achieved an 8% organic revenue growth. Factoring in the recent acquisition of Vanooy, the total revenue growth for the IP segment reached the high teens. This acquisition supported IP’s growth and contributed 16 points to the IP’s total revenue increase in Q4 2024.
This segment’s performance was also fueled by the growth in pump projects. Notably, in Q4 2024, IP’s revenue from pump projects saw a 22% organic increase, alongside a 7% organic growth in short-cycle products. For 2024, IP’s organic growth in pump projects was 19%, which came after an even higher 31% in 2023. The IP segment is positioned for continued growth because of a record backlog of over $900 million.
9. Rocket Lab USA Inc. (NASDAQ:RKLB)
Market Capitalization as of April 25: $10.15 billion
Number of Hedge Fund Holders: 37
Rocket Lab USA Inc. (NASDAQ:RKLB) offers space systems solutions internationally. It provides launch services, spacecraft design services, spacecraft components, spacecraft manufacturing, and other spacecraft and on-orbit management solutions. It also designs and manufactures small and medium-class rockets.
In March, Rocket Lab was included in the Phase 3, Lane 1 of the National Security Space Launch program by the US Space Force. Rocket Lab could win $5.6 billion worth of contracts from Space Force. This inclusion shows the company’s ability to launch the kind of spacecraft that the government plans to launch over the next 5 years. Under such reasons, Wells Fargo reiterated an Equal Weight on the stock on April 8, while lowering the $21 price target to $18.
In Q4 2024, the company’s Space Systems segment delivered $90 million in revenue, which was up ~7% sequentially. For full 2024, the Space Systems segment made $310.8 million in revenue, which was up 80% year-over-year. Rocket Lab USA, Inc. (NASDAQ:RKLB) has many spacecraft in different stages of production, with expectations to have over quadruple the number of its spacecraft in orbit or having completed missions by the end of summer 2025.
8. Hubbell Inc. (NYSE:HUBB)
Market Capitalization as of April 25: $19.28 billion
Number of Hedge Fund Holders: 38
Hubbell Inc. (NYSE:HUBB) designs, manufactures, and sells electrical and utility solutions internationally. It operates through two segments: Electrical Solutions and Utility Solutions. It designs and manufactures various industrial controls and communication systems for use in the non-residential and industrial markets, as well as in the oil & gas and mining industries.
In 2025, Hubbell anticipates organic growth of 4% to 6% within its Utility solutions segment, which makes it the highest growth area for the company. This outlook is supported by the company’s ability to capitalize on electrification-driven load growth and interconnection projects across the transmission, substation, and grid protection and controls markets.
While the meters and AMI (Advanced Metering Infrastructure) business within Utility Solutions is expected to decline year-over-year in 2025, Hubbell Inc. (NYSE:HUBB) is confident that both telecom markets and the high-margin utility distribution markets will return to growth within the year. In Q4 2024, the Utility Solutions segment grew its sales by 4%. This was majorly fueled by the acquisition of Systems Control. This acquisition provides turnkey solutions in the substation market.
7. Lennox International Inc. (NYSE:LII)
Market Capitalization as of April 25: $18.71 billion
Number of Hedge Fund Holders: 39
Lennox International Inc. (NYSE:LII) designs, manufactures, and markets products for the heating, ventilation, air conditioning, and refrigeration markets. The company operates in segments called the Home Comfort Solutions and the Building Climate Solutions. It sells its products and services through direct sales, distributors, and company-owned parts and supplies stores.
The HCS (Home Comfort Solutions) segment increased its sales by 7% year-over-year in Q1 2025. This was driven by a positive product mix, as ~50% of the segment’s equipment sales during the quarter were the new, lower Global Warming Potential (GWP) R-454B product. The price yields achieved on this product were in line with the company’s expectation of 10%.
While overall sales volumes were flat year-over-year, this was a result of destocking headwinds from Q4 2024 pre-buy being offset by the stocking of the new R-454B products. HCS did not experience significant destocking in Q1 but anticipates some in Q2. The transition to low-GWP products is progressing, with R-410A inventory levels nearly depleted. This transition positions Lennox International Inc. (NYSE:LII) to capitalize on the demand for environmentally friendly HVAC solutions.
6. Carlisle Companies Inc. (NYSE:CSL)
Market Capitalization as of April 25: $16.22 billion
Number of Hedge Fund Holders: 42
Carlisle Companies Inc. (NYSE:CSL) manufactures and supplies building envelope products and solutions. It operates through two segments: Carlisle Construction Materials and Carlisle Weatherproofing Technologies. The company produces single-ply roofing products and warranted roof systems & accessories. It also offers building envelope solutions.
In Q1 2025, the company’s CCM (Carlisle Construction Materials) segment reported revenues of $799 million, which was up 2% year-over-year. This was supported by the acquisition of MTL and strong reroofing activity, which helped offset a 1% decline in organic revenue. The MTL acquisition boosted Carlisle’s CCM revenue through expanded product offerings in architectural metals and the realization of substantial cost synergies. The reroofing demand makes up 70% of CCM’s commercial business.
Carlisle Companies Inc. (NYSE:CSL) anticipates mid-single-digit revenue growth for the CCM segment for 2025. While Q2 2025 for CCM will reflect a negative impact from accelerated purchases in Q1 ahead of anticipated tariff-related price increases, the underlying strength will eventually provide a stable and recurring revenue stream years to come.
Madison Mid Cap Fund stated the following regarding Carlisle Companies Incorporated (NYSE:CSL) in its Q1 2025 investor letter:
“We added to two stocks during the quarter. Carlisle Companies Incorporated (NYSE:CSL) shares were weak given concerns over residential and non-residential real estate demand given interest rates and economic uncertainty. However, valuation looks compelling given the solid long-term outlook for demand and earnings.”
5. Masco Corp. (NYSE:MAS)
Market Capitalization as of April 25: $12.75 billion
Number of Hedge Fund Holders: 43
Masco Corp. (NYSE:MAS) provides home improvement and building products in North America, Europe, and internationally. The company’s Plumbing Products segment manufactures products like faucets, showerheads, shower drains, and water filtration systems. Its Decorative Architectural Products segment offers paints, primers, specialty coatings, stains, and waterproofing products.
In Q1 2025, the company’s Plumbing segment had its sales increase by ~1%. Within this segment, North American plumbing sales also grew by ~1% due to higher volumes in the spa and sauna business and favorable pricing, which partially offset lower volumes in the retail channel. This performance was achieved despite facing cost increases due to newly enacted tariffs, particularly on imports from China.
However, the Plumbing segment is expected to be significantly impacted by the new tariffs. Masco Corp. (NYSE:MAS) estimates an in-year cost of ~$400 million in 2025 due to these tariffs, before any mitigation efforts. The annualized impact of these incremental tariffs is estimated to be ~$625 million out of a total annualized tariff impact of $675 million for the entire company. However, Masco estimates that it can offset ~$200 to $250 million, or roughly 50% to 65%, of these tariff costs during 2025.
4. Owens Corning (NYSE:OC)
Market Capitalization as of April 25: $12.32 billion
Number of Hedge Fund Holders: 48
Owens Corning (NYSE:OC) manufactures residential and commercial building products through four segments: Roofing, Insulation, Doors, and Composites. The company offers laminate and strip asphalt roofing shingles, roofing components, and oxidized asphalt. It also provides high, mid, and low temperature products.
In Q4 2024, the company’s Roofing segment made $912 million in sales, which was a slight decrease from the prior year. However, the segment continued to experience demand for its shingles (elements used as a roof covering to create a waterproof barrier) and achieved positive price realization. Notably, the US asphalt shingle market volume was up 1% year-over-year, and Owens Corning’s US shingle volume was in line with this market growth.
In Q1 2025, the company anticipates revenue for the legacy roofing business to be in line with the prior year, with market shipments expected to be flat/slightly down. Owens Corning’s (NYSE:OC) is also making ongoing investments in shingle capacity, which include a new laminate shingle manufacturing facility expected to begin production in 2027.
3. Pentair (NYSE:PNR)
Market Capitalization as of April 25: $14.81 billion
Number of Hedge Fund Holders: 49
Pentair (NYSE:PNR) provides water solutions. The Flow segment designs, manufactures, and sells fluid treatment and pump products & systems. The Water Solutions segment offers commercial and residential water treatment products & systems. The Pool segment provides residential and commercial pool equipment & accessories.
Total Sales in the company’s Pool segment increased by 7% year-over-year to $384 million in Q1 2025 due to a combination of price, volume, and the acquisition of G&F Manufacturing made in Q4 2024. The return on sales for the Pool segment expanded by 2% to 32.8%. Pentair anticipates continued positive momentum in the Pool segment.
For Q2 2025, the company expects Pool sales to be up in the mid-single digits. The overall strategy for Pentair (NYSE:PNR) involves driving incremental sales growth through value-based pricing and the 80/20 framework, which focuses on high-value core sales growth by serving the best customers. The company is actively pursuing transformation initiatives to drive margin expansion across all segments.
Impax Global Environmental Markets Fund stated the following regarding Pentair plc (NYSE:PNR) in its Q3 2024 investor letter:
“Pentair plc (NYSE:PNR) (Water Distribution & Infrastructure, US) outperformed during the period. After weakness in Q2, driven by dour reports from other parts of its value chain, earnings released in July were better than expected. Guidance on the back of margin improvement from self-help initiatives (productivity, pricing and footprint rationalization initiatives) was also upbeat.”
2. Curtiss-Wright Corp. (NYSE:CW)
Market Capitalization as of April 25: $12.75 billion
Number of Hedge Fund Holders: 50
Curtiss-Wright Corp. (NYSE:CW) manufactures engineered products, solutions, and services mainly to aerospace & defense, commercial power, process, and industrial markets. It operates through three segments: Aerospace & Industrial, Defense Electronics, and Naval & Power.
In Q4 2024, the Sales in Curtiss-Wright’s Naval & Power segment improved by 12% year-over-year due to higher revenue across key platforms in Naval Defense. This included stronger-than-anticipated production on Columbia class and Virginia class submarines, as well as the CVN-81 aircraft carrier program. The segment also experienced higher development revenues on the next-generation SSN(X) submarine program and increased demand for aircraft handling systems from international customers.
In 2025, Curtiss-Wright anticipates overall sales growth of 10% to 11% in the Naval & Power segment due to the continued solid growth in both its Defense and Commercial Markets. Specifically within Naval Defense, growth of 3% to 5% is expected, which reflects higher revenue on aircraft carriers (including increased production on CVN-81) and support for the CVN-75 refueling and complex overhaul program.
1. Builders FirstSource Inc. (NYSE:BLDR)
Market Capitalization as of April 25: $13.8 billion
Number of Hedge Fund Holders: 59
Builders FirstSource Inc. (NYSE:BLDR) manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, subcontractors, remodelers, and consumers. It offers manufactured products, such as wood floor & roof trusses, floor trusses, wall panels, stairs, and engineered wood products.
While Builders FirstSource operates across various product categories, its strategic emphasis and investments lie in the value-added products and services. In 2024, the company invested more than $75 million in expanding its value-added capabilities. This included the opening of 2 new truss manufacturing facilities, upgrades to 19 truss facilities, and enhancements to 13 millwork locations.
The success of this is evident in the 8% year-over-year increase in install sales in 2024. In 2024, Builders FirstSource Inc. (NYSE:BLDR) achieved $134 million in incremental digital sales despite a challenging market. The company now projects ~$200 million in additional incremental digital sales in 2025 from wallet share expansions and new customer acquisitions. On February 23, Keith Hughes from Truist Financial maintained a Buy rating on the stock, with a price target of $180.
Giverny Capital Asset Management recently initiated a position in the company and stated the following regarding Builders FirstSource Inc. (NYSE:BLDR) in its Q1 2025 investor letter:
“At the end of the quarter, we established a position in Builders FirstSource, Inc. (NYSE:BLDR), a building products distributor. We bought stock around $126 per share, while Wall Street analysts believe the company should earn nearly $10 per share this year. That feels like a good price for a company of this caliber.
Builders is a key support system for the nation’s homebuilders. It carries a wide range of products like lumber, millwork, windows and prefabricated components. Increasingly, it provides homebuilders with value-added services that help them build homes with less labor. For example, Builders can frame walls of a home at a central location and deliver panels to a job site for quick assembly. This reduces both labor and lumber waste on the job site and improves the home’s structural integrity. The US is likely to have long-term shortages of construction labor, so this off-site assembly creates considerable value and should become a common way to fabricate homes.
Builders is by far the largest value-added distributor with 590 branches around the country. It has procurement clout with lumber mills and others, and the sprawling branch network means it usually has lower freight costs to deliver materials to a job site…” (Click here to read the full text)
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