10 Best Industrial Distribution Stocks to Invest In According to Hedge Funds

In this article, we will take a look at some of the best industrial distribution stocks that are being highly favored by hedge funds. On June 15, Reuters reported flat U.S. factory manufacturing data during May, after several months of growth. Few economists attributed this to stockpiling by businesses, given the ongoing uncertainties related to the U.S.-Iran conflict. Chief U.S. Economist at Pantheon Macroeconomics, ⁠Samuel Tombs, reflected on this situation by stating:

“Many businesses have feared since February that the ​sudden closure of the Strait of Hormuz would trigger supply chain disruptions later this year, and so placed orders with manufacturers early.”

Vimal Kapur, CEO of Honeywell, spoke with CNBC on June 11 prior to the company’s aerospace business spinoff planned for later this month. Kapur reflected on this move, which would turn Honeywell into an automation pure play, by acknowledging the impact of artificial intelligence on operational automation.

Citing an aging working population and shortage of skilled labor, Kapur emphasized an increasing demand for automation, which is expected to be reshaped by AI capabilities. He also highlighted the customer viewpoint regarding operational automation across businesses. Customers perceive such a shift as an opportunity to expand business revenues, rather than curtailing costs. He mentioned:

“Our customers are looking at it not as a productivity opportunity. They are looking at it as a revenue-generation opportunity.”

With that background, let’s explore our 10 Best Industrial Distribution Stocks to Invest In According to Hedge Funds.

Our Methodology

To identify relevant stocks for this article, we screened U.S.-listed industrial companies with market capitalizations above $2 billion. Next, we identified the number of hedge funds holding positions in these stocks as of the end of the first quarter of 2026. Finally, we selected 10 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.

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. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).

10. GATX Corp. (NYSE:GATX)

GATX Corp. (NYSE:GATX) is one of the 10 best industrial distribution stocks to invest in according to hedge funds.

On May 22, GATX Corp. made amendments to its ongoing 5-year credit arrangement, which began back in May 2024, with a banking syndicate led by Citibank. In addition to recalibrating price terms linked to the company’s public credit rating, this change also extended the facility’s termination date by 1 year, to May 2031.

The applicable margin on revolving loans was reduced under the new arrangement. ABR-based borrowings have margins between 0 and 30 basis points, while SOFR-based borrowings have margins between 80.5 and 130 basis points, contingent on the firm’s rating.

Furthermore, the company obtained a decreased facility fee, resetting the grid from 7 to 20 basis points to lower recurring financing costs and expand financial flexibility for future operations and investment needs.

Recent analyst ratings also offer supporting views for the stock. During early May, Susquehanna revised its view of GATX Corp. by increasing the target price from $210 to $218. This results in an adjusted upside potential of almost 25% at the current level. The firm also maintained its Positive rating for the stock, backed by first-quarter results.

GATX Corp. is a railcar leasing company that leases tank containers, freight railcars, and locomotives and provides maintenance services. The company also makes commercial aircraft jet engines and leases aircraft spare engines.

9. United Rentals Inc. (NYSE:URI)

United Rentals Inc. (NYSE:URI) is one of the 10 best industrial distribution stocks to invest in according to hedge funds. The company remains committed to enhancing its AI-enabled capabilities. Back on May 19, it announced the expansion of its AI-powered Equipment Agent to the ChatGPT platform. This gives customers a quicker and easier way to find equipment solutions for complex jobsites and urgent requirements. This is the first-ever equipment rental tool available from the ChatGPT platform.

The tool was rolled out earlier this year as the first recommendation engine for the sector, guiding operators on project requirements via the chat interface and providing recommendations for equipment accordingly. Metrics collected to date show that customers are using the tool for specifications and rentals.

Speaking about this tool, Tony Leopold, SVP and Chief Technology & Strategy Officer at United Rentals, said that AI makes expertise more accessible. He stated that by making the tool available via ChatGPT, the company is meeting operators on the digital platforms they already utilize to plan work and make decisions.

Such developments, along with survey-led momentum, have led analysts to take notice of the company’s prospects. During the first week of June, UBS increased its target price on the stock from $1,025 to $1,145, while reiterating a Buy rating on the stock.

United Rentals Inc. is an equipment rental company that offers trench and underground safety equipment, climate and fluid solutions, industrial equipment, and site infrastructure. The company also provides storage equipment for rent, and sells compressors, aerial lifts, reach forklifts, and generators.

8. Custom Truck One Source Inc. (NYSE:CTOS)

Custom Truck One Source Inc. (NYSE:CTOS) is one of the 10 best industrial distribution stocks to invest in according to hedge funds.

On May 27, Custom Truck One Source Inc. announced that it has secured a cooperative purchasing contract through Sourcewell. Speaking about this development, Ryan McMonagle, CEO of Custom Truck, stated that selection by Sourcewell was an important achievement, and this would go a long way in reiterating the faith of its customers in the company.

He stated that through a streamlined cooperative purchasing process supported by its nationwide capabilities, the company hopes to expand its partnerships with local, state, and federal agencies throughout North America.

Earlier on May 26, Cantor Fitzgerald increased its price target on Custom Truck One Source Inc. from $11 to $13, which now yields a revised upside of almost 24%. The firm also maintained an Overweight rating on the stock.

Cantor noted that meetings with investors have left a strong impression of the company’s progress as it embarks on the execution phase. The firm expects normalization in capex, which will allow the company to create stable free cash flows and continue deleveraging. Strong utility transmission demand, better segment visibility, and rising rental metrics all contribute to this positive outlook.

Custom Truck One Source Inc. performs specialty equipment rental and sale services in the U.S. and Canada. The company sells new and used equipment, including insulated hot sticks, rigging equipment, service trucks, dump trucks, trailers, and digger derricks. The company also provides maintenance and repair services.

7. Xometry Inc. (NASDAQ:XMTR)

Xometry Inc. (NASDAQ:XMTR) is one of the 10 best industrial distribution stocks to invest in according to hedge funds.

On June 2, Xometry Inc. announced that it has initiated an underwritten public offering worth $225M involving its Class A common shares. The net proceeds resulting from this offering will be utilized by the company for general corporate needs and to meet its working capital requirements.

The company revealed that J.P. Morgan and Goldman Sachs & Co. are facilitating the proposed offering as joint book-runners.

The company’s impressive first-quarter performance has also been grabbing analyst interest. Back on May 13, following the first quarter earnings report, Citi decided to update its outlook on Xometry Inc.. The firm raised its target price on the stock from $65 to $98, while maintaining a Buy rating. Citi noted that the company’s marketplace growth is currently ramping up.

The firm also outlined the fundamental drivers behind the upward revision in price target. The company’s newer producers are leading to enhanced average revenue per user gains for the business. Citi highlighted Xometry’s partnership with Siemens and believes that this specific collaboration is expected to bring significantly faster growth and profitability.

Xometry Inc. is an AI-powered online manufacturing marketplace that connects buyers with suppliers of manufacturing services through an instant quoting engine. The company operates Thomasnet, which is a platform offering digital marketing services to manufacturers. The company also provides cloud-based systems, rapid prototyping, injection molding, 3D printing, sheet forming, and more.

6. Watsco Inc. (NYSE:WSO)

Watsco Inc. (NYSE:WSO) is one of the 10 best industrial distribution stocks to invest in according to hedge funds. The company has been aiming to expand its strategic footprint through recent acquisitions, making it one of the most attractive names on our list.

On June 2, Watsco Inc. announced the conclusion of its acquisition of Jackson Supply Company. Jackson Supply has been a cornerstone of the HVAC distribution industry for more than 50 years, growing from its founding back in 1972 into one of the Sunbelt’s largest independent distributors, bringing in $230 million in sales in 2025.

This investment expands Watsco’s footprint across the Sunbelt, adding 25 locations and approximately 5,000 contractor customers across Texas, Louisiana, Tennessee, Alabama, Mississippi, Oklahoma, and Arizona, which represent some of the fastest-growing markets in the United States.

Jackson Supply will keep its name, vendor relationships, go-to-market strategy, brand identity, and culture. The company will continue to be led by its existing leadership team, including Jim Durrett. Watsco’s Chairman and CEO, Albert H. Nahmad, welcomed the business, noting their five decades of entrepreneurial success.

The transaction underscores Watsco’s commitment to expanding its share of the estimated $74 billion North American HVAC/R distribution market as they seek further growth opportunities with independent distributors.

Watsco Inc. distributes commercial air conditioning and heating equipment systems, residential ducted equipment, and ductless air conditioners. It also offers plumbing and bathroom remodeling supplies, replacement parts, and HVAC supplies. It serves dealers and contractors who manage replacement and new construction markets.

5. WESCO International Inc. (NYSE:WCC)

WESCO International Inc. (NYSE:WCC) is one of the 10 best industrial distribution stocks to invest in according to hedge funds. The company’s acquisitive strategy leads to an optimistic narrative around the stock performance.

On June 9, Wesco International Inc. announced that it has entered into a definitive agreement to acquire Newark Engineering. The target company, based in Singapore, focuses on providing critical infrastructure lifecycle services and engineered cooling systems designed especially for data centers.

Some of the key aspects of this acquisition include Wesco taking full 100% ownership of Newark at a cash-free, debt-free purchase price of 175 million Singapore Dollars, which translates to about $136 million in US Dollars. Regarding financial performance, Newark generated approximately $60 million in total revenue over the course of the 2025 fiscal year.

With an attractive purchase multiple that is below the current trading multiple of Wesco, this transaction is structured to be immediately EBITDA margin accretive to the broader Wesco portfolio. Going ahead, the acquisition is anticipated to close in the third quarter of 2026, and the completion remains contingent on customary regulatory approvals and standard closing conditions.

Analyst ratings are also backing a favorable view surrounding the stock. Back on May 29, Guy Hardwick from Barclays marginally increased his target price for the stock from $375 to $376, while reaffirming an Overweight rating.

WESCO International Inc. provides logistics services, supply chain solutions, and business-to-business distribution in the U.S., Canada, and internationally. The company offers wire and cable, lighting, transformers, switches, connectors, electrical equipment, and safety products. It also provides data center and network infrastructure, security solutions, automation devices, metering infrastructure, and energy management solutions.

4. Applied Industrial Technologies Inc. (NYSE:AIT)

Applied Industrial Technologies Inc. (NYSE:AIT) is one of the 10 best industrial distribution stocks to invest in according to hedge funds. The broader consensus sentiment around Applied Industrial Technologies Inc. (NYSE:AIT) is strongly bullish. The stock has received Buy ratings from all 6 analysts covering it. Recent analyst ratings also support this favorable stance towards the stock.

On June 16, Chris Dankert from DA Davidson initiated coverage of Applied Industrial Technologies Inc.. The analyst assigned a Buy rating to the stock with a price target of $380, implying upside potential of close to 18% from the current level.

Dankert reflected on an encouraging industrial cycle that is evolving favorably at the moment. He views the company to be perfectly positioned to exhibit an impressive operating leverage, which would support an upward adjustment to future projections. The analyst believes that the company will witness accelerating gross margin, backed by tailwinds related to its structural mix.

Moreover, Dankert acknowledged the company’s sound financial position, as indicated by its clean balance sheet. This, along with strong cash-flow-generating ability, will allow management to deploy capital efficiently.

Applied Industrial Technologies Inc. distributes industrial products and solutions such as industrial bearings, power transmissions, pneumatic components, filtration supplies, and conveyor belt repair services. It also provides flow control products and advanced automation technologies. These include machine vision, engineered fluid power solutions, motion control, and industrial networking solutions.

3. Fastenal Co. (NASDAQ:FAST)

Fastenal Co. (NASDAQ:FAST) is one of the 10 best industrial distribution stocks to invest in according to hedge funds. Recent analyst ratings appear to inspire a lot of confidence in the company’s prospects for the foreseeable future.

On June 4, Jefferies maintained its Buy rating and a $52 target price on Fastenal Co.. As per the firm’s estimates, the stock yields double-digit upside above 11% at the prevailing level.

Jefferies emphasized that the market expects net sales to rise by 11.7% in the second quarter. Based on the numbers gathered from April and May, the company needs to achieve about 6% daily sales growth in June to meet those expectations. Additionally, the firm has noted that short-cycle green shoots are consistently widening across the industry.

On June 3, Guy Hardwick from Barclays updated his estimates for Fastenal Co. ahead of the company’s May sales release. The analyst kept an Equal Weight rating on the stock, while adjusting its target price upward from $45 to $46.

Hardwick’s adjustment to the target price is underpinned by Barclays modeling a strong daily sales expansion for Fastenal, forecasting a 14.4% year-over-year daily sales growth rate for the month of May.

Fastenal Co. engages in the wholesale distribution of industrial and construction supplies. It offers fasteners like nuts, studs, and bolts and related industrial and construction supplies. It also sells miscellaneous supplies and hardware such as wire ropes, rivets, and strut products. The company serves the manufacturing market, including original equipment manufacturers.

2. W.W. Grainger Inc. (NYSE:GWW)

W.W. Grainger Inc. (NYSE:GWW) is one of the 10 best industrial distribution stocks to invest in according to hedge funds.

The consensus estimates support a bullish argument in favor of W.W. Grainger Inc.. As of the close of play on June 12, the stock received moderately bullish analyst views. It received Buy ratings from 4 analysts who covered it, while 4 analysts called it Hold. With just 1 Sell rating, the stock has a 1-year median target price slightly above $1,286.

On May 27, Christopher Snyder from Morgan Stanley updated his projections for W.W. Grainger Inc. after factoring in actual first-quarter performance figures and rolling out its forward projections. The analyst chose to maintain his Equal Weight rating on the shares, while increasing the price target from $1,190 to $1,300.

Back on May 11, the target price on W.W. Grainger Inc. was increased from $1,300 to $1,355 by Tommy Moll, an analyst at Stephens. Moll also maintained his Overweight rating on the stock. The revision is based on the company’s first-quarter announcements, which led the firm to revise its model.

W.W. Grainger Inc. distributes maintenance, repair, and operating products in Japan, the UK, and North America. It provides pumps and plumbing equipment, cleaning and maintenance, material handling, storage equipment, and tools. The company also offers inventory management and technical support services. It serves smaller businesses to large corporations, government entities, and other institutions.

1. QXO Inc. (NYSE:QXO)

QXO Inc. (NYSE:QXO) is one of the 10 best industrial distribution stocks to invest in according to hedge funds.

On June 4, QXO Inc. and TopBuild Corp. (NYSE:BLD) reported that the cutoff for TopBuild stockholders to select their preferred form of consideration regarding the corporate acquisition is set for June 29, 2026. As detailed in the joint proxy prospectus dated May 29, investors can choose either $505 in cash consideration or 20.20 QXO common shares as stock consideration for each TopBuild share owned. The particular election and proration processes described in the merger agreement still apply to these decisions.

Stockholders will automatically receive stock consideration if they do not submit a valid selection by the deadline. Additionally, if applicable, cash will be given in place of fractional shares. Record holders must send completed papers to Equiniti Trust Company, LLC in order to complete an option. Investors are encouraged to contact Innisfree M&A with questions about this transaction process.

Besides this, the analyst ratings for the stock have fueled bullish projections. Back on May 13, Baird reiterated its Outperform rating for the company, while cutting down the target price from $35 to $30. Despite such downward revision, the estimates still lead to an impressive upside potential in excess of 83%.

QXO Inc. is a tech-enabled distributor of building products such as roofing, waterproofing, materials, and related supplies. It markets its offerings through contractors, distributors, and suppliers. The company is currently in an aggressive pursuit of its inorganic growth strategy, with the aim of expanding the topline to $50 billion within the next decade.

Follow Insider Monkey on Google News.