Top Investors’ Stock Portfolio: 7 Small-Cap Stocks to Invest In

4) Kennametal Inc. (NYSE:KMT)

Market Cap as of 9 October: $1.95 billion

Number of Hedge Fund Holders: 23

Kennametal Inc. (NYSE:KMT) is engaged in manufacturing, purchasing, and distributing tools, tooling systems, and solutions to the metalworking, mining, oil, and energy industries.

Kennametal Inc. (NYSE:KMT) recently showcased its efforts in investment and automation, which form part of its strategy to improve efficiency and profitability amidst industry challenges. Additionally, the company continues to explore potential changes in its selling approach, which should help it enhance market penetration and customer retention.

Market experts opine that Kennametal Inc. (NYSE:KMT)’s strong emphasis on innovation and automation should translate into improved operational efficiency, reduced costs, and enhanced product quality. By making investments in cutting-edge technologies, Kennametal Inc. (NYSE:KMT) plans to differentiate itself from competitors and tap a larger market share. The focus on automation should help mitigate the impact of labor shortages and wage pressures.

Moreover, innovative products and processes should help in opening up new market opportunities or applications for Kennametal Inc. (NYSE:KMT)’s expertise in materials science and tooling. As per Wall Street, these initiatives are expected to position Kennametal Inc. (NYSE:KMT) as a leader in Industry 4.0 technologies in its sector and can potentially attract new customers and create additional revenue streams.

For FY 2025, the company expects sales of between $2.0 billion – $2.1 billion, with pricing actions likely to cover raw material costs, wages, and general inflation. It expects its adjusted EPS to be in the range of $1.30 – $1.70. Heartland Advisors, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:

“These are companies like Kennametal Inc. (NYSE:KMT), the manufacturer of industrial cutting tools and components that we mentioned in our Q1 commentary. The company is emerging from trough demand and has seen EBITDA contract on a year-over-year basis in 5 of the last 7 quarters. But the company has been undergoing extensive self-help during the past 5 years, taking out $200 million in structural costs, cutting its headcount by 20%, and closing 6 plants as part of an extensive restructuring. The heavy lifting/investment phase seems to now be in the rearview mirror. While demand has not yet inflected higher, sales are stabilizing. If Kennametal sees even a slight pickup in demand in its end markets, that could provide an immediate and robust boost to its operating margins. Furthering our confidence, KMT’s newly appointed CEO purchased shares in the quarter and the company is active on its buyback program.”