Five Cheap Industrial Stocks that Captured Smart Money’s Attention

The industrial sector has been hit by a slowdown in capital spending from oil and gas companies. The drop in prices of commodities such as iron ore and copper has also had a negative impact on demand for mining equipment. However, some areas such as construction equipment still remain strong, driven by the housing market in the U.S.

Nevertheless, the industrials sector has gained over 8% since the beginning of the year, outperforming the S&P 500, but its average P/E ratio of 15.7 is still lower compared to the Index’s 19.7. However, despite strong returns, there are many bargains available within the sector. In this article, we are going to take a look at five industrial stocks that are currently trading under $10 per share and which rank as the most popular among some 749 smart money investors in our database.

Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).

In Manitowoc Company Inc (NYSE:MTW), the number of funds from our database long its stock inched down by one to 27 during the second quarter, but the total value of their positions advanced to $215.18 million from $203.45 million and amassed nearly 29% of the company’s float at the end of June. The stock has surged by more than 48% since the beginning of the year, as the company spun-off Manitowoc Food Services in March and focused on its crane business. The move also allowed Manitowoc to realign its strategy, reduce costs and optimize its manufacturing. Back in August, Manitowoc Company Inc (NYSE:MTW) posted earnings of $0.04 per share for the second quarter, which were in-line with the consensus estimate. However, its revenue of $457.7 million fell short of consensus forecast by $6.28 million. At the same time, the company announced plans to move its crawler crane manufacturing to Pennsylvania from Wisconsin, in a move that is expected to generate annualized cost savings of $25-30 million.

The number of funds from our database long CNH Industrial NV (NYSE:CNHI) surged to 16 from 11 during the second quarter, but the aggregate value of their holdings declined to $388.72 million from $399.53 million. The stock inched up by 7% year-to-date and is trading at 16 times forward earnings. For the second quarter, CNH Industrial posted better-than-expected results, with EPS of $0.16, topping estimates by $0.05, while revenue of $6.80 billion was $150 million above expectations.

Among the funds in our database, 15 amassed $68.51 million worth of Casella Waste Systems Inc. (NASDAQ:CWST) shares at the end of June compared to 13 funds and $61.87 million, respectively, a quarter earlier. The stock has had a strong run so far this year, registering gains of over 74% and recently topping the $10 mark and is currently trading close to its 52-week high of $10.71. The stock gained over 10% on September 26, following news that Casella Waste Systems Inc. (NASDAQ:CWST) plans to refinance its debt with a $150 million revolving credit facility and a $350 million term loan B. The company plans to use the proceeds to pay off its asset-backed lending facility and senior subordinated notes. In addition, following a strong pricing and operational performance in the first months of the third quarter, the company boosted its full fiscal 2016 EBITDA guidance to $115-$117 million from the previous $111-$115 million range.

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) had 10 funds from our database holding $18.66 million worth of shares in aggregate at the end of the second quarter. However, while the number of funds long the stock increased by two over the quarter, the value of their positions slid from $21.60 million. The stock had appreciated by 10% in the first six months of 2016, but consecutively gave up the gains and is 12% in the red year-to-date. One of the main reasons for the decline were the lower-than-expected results reported by Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) for the second quarter. The company’s loss of $0.03 per share, missed the consensus estimate by $0.04, while its revenue of $192.2 million declined by 19.5% on the year and was $29.93 million below expectations.

In American Superconductor Corporation (NASDAQ:AMSC), the number of investors holding shares inched up by one to nine and the value of their holdings appreciated to $5.70 million from $4.19 million during the second quarter. Shares of American Superconductor Corporation are 9.30% in the green since the beginning of the year, even though the company had posted better-than-expected financial results for the fiscal third and fourth quarters. However, for the fiscal 2016 first quarter (ended June 30), the company reported a loss of $0.64 per share, beating the estimates of a loss of $0.92 per share, but its revenue of $13.35 million was lower than the expected $13.31 million and declined by 43.7% on the year.

Disclosure: none