We recently published a list of 12 Best Industrial Distribution Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Ferguson Enterprises Inc. (NYSE:FERG) stands against other 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.
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).
A busy warehouse stocked with a variety of industrial plumbing parts.
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”
Overall, FERG ranks 1st on our list of best industrial distribution stocks to buy according to hedge funds. 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 timeframe. 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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Disclosure: None. This article is originally published at Insider Monkey.
