In this article we will take a look at the best manufacturing stocks to buy now.
Manufacturing stocks languished throughout 2020, hammered by the coronavirus crisis that crushed demand worldwide. But data indicates that manufacturing is rebounding worldwide, and now might be the ideal time to pile into manufacturing stocks for long-term gains. According to Manufacturing ISM Report On Business, Manufacturing PMI index read 60.8% in February 2021, up 2.1% percentage points from the January. The report said that the latest figure shows the overall economy expanded for ninth months in a row after contracting in March, April and May. The New Orders Index came in at 64.8% while Production Index was 63.2%, a 2.5 percentage point rise from January. A reading above 50 indicates that manufacturing activity expanded.
Growth Catalysts for Manufacturing Stocks
U.K.-based financial data company IHS Markit’s Manufacturing Purchasing Managers’ Index for February also jumped to a three-year high of 57.9.
Factories in the U.S. had already started to show signs of revival in December 2020. IHS Markit’s purchasing managers index for the U.S. manufacturing in December jumped to 57.1, from 56.7 in November.
IHS Markit’s purchasing managers’ index for the eurozone’s manufacturing sector also rose to 55.2 in December from 53.8 in November, reaching its highest level since May 2018. The firm said that the manufacturers were able to ward off the devastating effects of the coronavirus crisis because they are extremely crucial to support the economy, as compared to the services sector which will take years to recover.
Consumer Spending Makes a Raging Recovery
Consumer spending is making an unexpectedly strong recovery, causing companies to scramble to keep up with the demand. The market is seeing an unprecedented demand for gym equipment, electronics, kitchen items, outdoor products, sports goods, computer peripherals, bicycles, boats and cars. Major car companies, including Volkswagen, Honda, Ford and Continental, were forced to shutter their plants recently amid a shortage of semiconductors in the world. According to the U.S. government statistics, consumer spending jumped 2.4% in January, the biggest jump since June.
The coronavirus crisis has made stock-picking extremely difficult even for expert investors. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
All of these factors indicate that manufacturing stocks are bound to gain value amid the rising economic activity. In this article we will discuss 10 best manufacturing stocks to buy now. The manufacturing stocks we picked have strong products with huge growth prospects and attractive valuations. We ranked these stocks based on the hedge fund sentiment data, which indicates the popularity of a stock among famous hedge funds. For that we used Insider Monkey’s database of over 887 hedge funds.
Let’s start our list of 10 best manufacturing stocks to buy now.
10. Mercury Systems, Inc. (NASDAQ: MRCY)
No. of Hedge Fund Holders: 10
Andover, Massachusetts-based Mercury Systems is one of the best manufacturing stocks to buy now. The company makes systems used in airplanes and radars. Its products include avionics computers, embedded processing modules, rugged computer servers, radio frequency and microwave components. In the most recent fiscal quarter, the company earned $0.54 per share, beating the Street’s estimates by $0.03. Revenue in the quarter jumped 8.7% to $210.7 million.
In December, Mercury Systems said it received a $14 million order from a major defense contractor for digital signal processing modules for deployment in a multi-mode tactical radar application.
A total of 10 hedge funds tracked by Insider Monkey were long MRCY at the end of December 2020, compared to 19 funds a quarter earlier.
9. American Superconductor Corporation (NASDAQ: AMSC)
No. of Hedge Fund Holders: 11
Massachusetts-based American Superconductor is one of the 10 best manufacturing stocks to buy now. The company makes solutions for wind turbines, electric utilities and renewable. These solutions help its customers connect, transmit and distribute power. In the most recent quarter, the company posted a loss of $0.13 per share, meeting the Street’s forecasts. However, revenue in quarter missed the consensus by $0.19 million despite growing 32%.
American Superconductor shares have gained a whopping 255% in the last 12 months.
Our database shows that 11 hedge funds held stakes in AMSC at the end of December, versus the 8 funds in the third quarter.
8. Raven Industries, Inc. (NASDAQ: RAVN)
No. of Hedge Fund Holders: 14
South Dakota-based Raven Industries is one of the 10 best manufacturing stocks to buy now. The company makes precision agriculture products, high-altitude balloons, plastic sheets and radar systems. In the third quarter, Raven said its revenue growth in Applied Technology and Aerostar segments was offset by declines in Engineered Films. Gross margin in the quarter expanded by 560 bps to 35.7%. The company generated $21 million in free cash flow, driven by strong profitability.
As of the end of the fourth quarter, 14 hedge funds in Insider Monkey’s database of 887 funds held stakes in Raven Industries Inc., compared to 16 funds in the third quarter. Royce & Associates is the biggest stakeholder in the company, with 1.04 million shares, worth $34.3 million.
7. TriMas Corporation (NASDAQ: TRS)
No. of Hedge Fund Holders: 14
TriMas Corporation is one of the best manufacturing stocks to buy now. The company has three segments: specialty products, aerospace and packaging. In February, the company posted its quarterly results, beating the Street’s forecasts for adjusted EPS by $0.07. Revenue in the quarter jumped 10.1% to $188.17 million, beating the estimates by $11.2 million.
Our database shows that 14 hedge funds held stakes in TriMas Corporation at the end of December. Pzena Investment Management is the biggest stakeholder in the company.
6. YETI Holdings, Inc. (NYSE: YETI)
No. of Hedge Fund Holders: 19
Texas-based Yeti manufactures and sells outdoor, hunting, fishing and recreation products, including coolers, drinkware, rafts, barbecue equipment, bottle openers and ice substitutes. The stock recently jumped after Citi upgraded it to Buy following the company’s upbeat revenue outlook. The firm likes Yeti’s foray into the luggage category, which it thinks would offset the post-COVID decline in demand for its other products. Citi increased its Yeti price target to $91 from $85.
According to our database, the number of YETI’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 19 hedge funds that hold a position in YETI Holdings by the end of December, compared to the 29 funds in the third quarter. The biggest stakeholder of the company is Ken Griffin’s Citadel Investment Group, with 401,592 shares, worth $27.5 million.
5 . iRobot Corporation (NASDAQ: IRBT)
No. of Hedge Fund Holders: 22
iRobot Corporation manufactures robots used for home and commercial purposes. The company’s robots are used for cleaning & healthcare purposes, AI research and machine learning. The company is operating in one of the most futuristic markets, as the robotics industry is expected to reach $176 billion by 2025 amid an increasing demand on the back of automation. iRobot shares have gained 155% over the last 12 months. It ranks 5th on the list of 10 best manufacturing stocks to buy now.
Arrowstreet Capital owns 522,623 shares of IRBT, worth $41.9 million.
4. Simpson Manufacturing Co., Inc. (NYSE: SSD)
No. of Hedge Fund Holders: 25
California-based Simpson Manufacturing makes building material like structural connectors, anchors and related retrofitting products. The stock has gained about 22% in value over the last 12 months. In the fourth quarter, the company posted a GAAP EPS of $0.68, beating the Wall Street by $0.03. Revenue in the period jumped 12% to reach $293.9 million. In 2021, the company expects its operating margin to come in between 16.5% to 18.5%.
With a $129.4 million stake in Simpson Manufacturing Co., John Rogers’ Ariel Investments currently owns 624,907 shares of the company as of the end of the fourth quarter of 2020.
3. TPI Composites, Inc. (NASDAQ: TPIC)
No. of Hedge Fund Holders: 27
Arizona-based TPI Composites ranks 3rd in our list of 10 best manufacturing stocks to buy now. The company makes wind blades that are used in wind power and energy sectors. The company has facilities in North America, China, Turkey, Africa and the Middle East. The stock is up 124% over the last 12 months. However, the stock value recently receded after Craig Hallum downgraded it with a $63 price target, citing weak Q4 results and valuation concerns.
Bruce Emery’s hedge fund, Greenvale Capital, owns $62.8 million worth of TPI Commposites Inc. shares.
2. Trex Company, Inc. (NYSE: TREX)
No. of Hedge Fund Holders: 30
Virginia-based Trex Company manufactures wood-alternative decking and railing, porch, fencing, trim, steel deck framing and outdoor lighting products. The stock is up 84% in the last 12 months. In the fourth quarter, Trex earned $0.37 per share, beating the consensus estimate by $0.01. Revenue in the quarter increased 38% and beat expectations. In the first quarter of 2021, Trex sees revenue of $235 million to $245 million.
As of the end of the fourth quarter of 2020, Broad Bay Capital holds $107.2 million worth of TREX shares. Broad Bay Capital is followed by Montanaro Asset Management and Waratah Capital Investors with $43.3 million and $20.3 million worth of TREX shares, respectively.
Our database shows that 30 hedge funds held stakes in Trex Company Inc. at the end of December, versus the 26 funds in the third quarter.
1. Armstrong World Industries, Inc. (NYSE: AWI)
No. of Hedge Fund Holders: 31
Founded in 1891, Pennsylvania-based Armstrong World Industries is one of the best manufacturing stocks to buy now. The company designs and sells walls and ceilings. The stock has gained 17% year to date. In January, Bank of America upgraded the stock to Buy from Neutral. The bank believes the company has seen the “bottom” in 2020 amid low demand and negative sentiment. In the fourth quarter, Armstrong World posted adjusted EPS of $0.77, beating the Street forecasts by $0.10. Revenue in the period slid 3.3% but beat the Street’s forecast by $7.27 million.
Gates Capital Management currently owns 1.7 million shares of Armstrong World Industries Inc. worth $125.5 million, as of December 31, 2020. Another major stakeholder is Cantillon Capital Management, which owns $92.6 million worth of AWI shares.
A total of 31 hedge funds tracked by Insider Monkey were long AWI at the end of December 2020, compared to 30 funds a quarter earlier.
You can also take a peek at Billionaire Julian Robertson’s Top 10 Stocks and Billionaire Stan Druckenmiller’s Top 10 Stock Picks.
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Disclosure: None. 10 Best Manufacturing Stocks To Buy Now is originally published on Insider Monkey.
