In this article, we will look at 10 stocks that will benefit from record-breaking temperatures.
Record Breaking Temperatures In The U.S.
Climate change and global warming are sending major heat waves to nations across the globe. On July 24, The New York Times reported that cities in the Northeast U.S. experienced record-high temperatures. The temperature in Newark surged to 101 degrees Fahrenheit, up from its 2010 record of 99 degrees Fahrenheit on July 24. In Boston, the temperature was recorded at 100 degrees Fahrenheit, up from its 1933 record of 98 degrees Fahrenheit on the same day. An estimated 71 million people across the U.S. were in areas that registered a heat index of 103 degrees Fahrenheit. In addition to the Northeast, the Midwest which includes Kansas, Missouri, and Oklahoma, and regions in Southern California and North Carolina also saw triple-digit temperatures.
Temperatures Reaching All-Time-Highs in Other Parts of The World
The U.S. is not the only nation that has reported record-breaking temperatures in July 2022. On July 18, The Washington Post reported that temperatures in six locations in the United Kingdom rose to 40 degrees Celsius and above, attaining all-time highs. London Heathrow and St. James Park recorded daily temperatures of 40.2 degrees Celsius, which is equal to 104.3 degrees Fahrenheit. The United Kingdom’s Met Office declared the heat wave a matter of national emergency. The U.K Met Office issued a Red heat warning for regions in central, northern, eastern, and southeastern England.
According to the World Economic Forum, these catastrophic events are being triggered and catalyzed by heat waves, which are a direct consequence of global warming and greenhouse gas emissions. The World Economic Forum reported that the global average temperature in 2022 is 1.2 degrees Celsius warmer than it was in pre-industrial times. ETH Zurich’s climate scientist, Sonia Seneviratne, now sees the likelihood of heat extremes to be “three times more frequent”.
The Global HVAC Market
With global temperatures rising, the HVAC industry is presenting an attractive entry point for investors due to favorable growth and demand trends in the sector. According to a Grand View Research’s report, the global HVAC systems market size was valued at $136.3 billion in 2021 and is expected to grow at a compound annual growth rate of 6.3% from 2022 to 2030. Primary drivers for this growth include climate change and the need to maintain comfortable indoor temperatures. An emerging trend in the HVAC industry is the need to make HVAC systems consume less energy and reduce greenhouse gas emissions by leveraging technological advancements in hardware devices, such as sensors and IoT. In 2021, the cooling sector accounted for 54.7% of the HVAC industry’s revenue and is expected to grow at a CAGR of 6% from 2022 to 2030. In 2021, residential clients represented the majority chunk of the industry’s revenue, followed by industrial and commercial markets.
Photo by Markus Spiske on Unsplash
Climate change is alarming governments worldwide. Businesses are restructuring their operations to meet their green energy and sustainability goals. Major corporations that are working towards eliminating greenhouse gas emissions include Microsoft Corporation (NASDAQ:MSFT), Exxon Mobil Corporation (NYSE:XOM), and Ford Motor Company (NYSE:F).
Our Methodology
To determine the 10 stocks that will benefit from record-breaking temperatures we reviewed the HVAC industry’s analysis reports and identified major players and prominent vendors of cooling equipment. We narrowed down our selection to stocks that had positive analyst and investor sentiment around them. Finally, we ranked our picks in increasing order of hedge fund holders.
To derive the hedge fund sentiment for each stock, we consulted Insider Monkey’s database which tracks roughly 900 elite hedge funds as of Q1 2022.
Stocks That Will Benefit from Record Breaking Temperatures
10. Modine Manufacturing Company (NYSE:MOD)
Number of Hedge Fund Holders: 13
Modine Manufacturing Company (NYSE:MOD) is a thermal management company that provides heat management solutions and services for the commercial electric vehicle, data center, power & industrial, automotive, refrigeration, and HVAC markets worldwide. On July 15, Modine Manufacturing Company (NYSE:MOD) announced the commencement of full-scale production of chillers for the data center market at the company’s production facility in Rockbridge, Virginia.
On July 14, Modine Manufacturing Company (NYSE:MOD) announced a collaboration with Texas AirSystems, an independent representative for commercial HVAC manufacturers, for the expansion of its Airedale brand. The company’s Airedale products will be marketed by Texas AirSystems in the Texas market. Through Airedale, Modine Manufacturing Company (NYSE:MOD) offers HVAC solutions that include ventilators, heat pumps, and cooling solutions for the data center market among other products.
At the end of the first quarter of 2022, 13 hedge funds held stakes in Modine Manufacturing Company (NYSE:MOD). The total value of these stakes amounted to $70.99 million. This is compared to 17 positions in the previous quarter with stakes worth $87.31 million.
As of March 31, GAMCO Investors owns more than 3.2 million shares of Modine Manufacturing Company (NYSE:MOD) and is the largest shareholder in the company. The fund’s stakes are worth $29.28 million.
9. AAON, Inc. (NASDAQ:AAON)
Number of Hedge Fund Holders: 13
AAON, Inc. (NASDAQ:AAON) engages in engineering, manufacturing, marketing, and selling of air conditioning and heating equipment in the United States and Canada. The company operates through three segments: AAON Oklahoma, AAON Coil Products, and BasX. . The company’s primary end-markets include retail, manufacturing, educational institutes, lodging, supermarket, data centers, medical & pharmaceutical, among other commercial industries.
Wall Street is bullish on AAON, Inc. (NASDAQ:AAON). On May 6, DA Davidson analyst Brent Thielman upgraded AAON, Inc. (NASDAQ:AAON) to Buy from Neutral and reiterated his $70 price target on the stock. The analyst noted that AAON, Inc. (NASDAQ:AAON) is efficiently managing supply chain challenges and inflation headwinds.
At the close of Q1 2022, 13 hedge funds were long AAON, Inc. (NASDAQ:AAON). The total stakes of these hedge funds amounted to $25.88 million, up from $14.71 million in Q4 2021 when 11 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive.
In the first quarter of 2022, Renaissance Technologies initiated a position in AAON, Inc. (NASDAQ:AAON) and bought shares worth $5.40 million of the company. As of March 31, Renaissance Technologies is the most prominent shareholder in AAON, Inc. (NASDAQ:AAON).
Other companies that Wall Street analysts are bullish on include Microsoft Corporation (NASDAQ:MSFT), Exxon Mobil Corporation (NYSE:XOM), and Ford Motor Company (NYSE:F).
8. Comfort Systems USA, Inc. (NYSE:FIX)
Number of Hedge Fund Holders: 14
Comfort Systems USA, Inc. (NYSE:FIX) provides mechanical and electrical installation, renovation, maintenance, repair, and replacement services for the mechanical and electrical services industry in the United States. The company is a leading services provider for HVAC systems and operates in the commercial, industrial, and institutional markets.
As of July 27, Comfort Systems USA, Inc. (NYSE:FIX) has a trailing twelve-month PE ratio of 16.65 and a forward dividend yield of 0.62%, which the company supports with free cash flows of $132.52 million.
As of March 31, Royce & Associates is the largest shareholder in Comfort Systems USA, Inc. (NYSE:FIX) and owns more than 0.1 million shares of the company. The fund’s stakes are valued at $10.57 million.
At the end of Q1 2022, 14 hedge funds held stakes in Comfort Systems USA, Inc. (NYSE:FIX). The total value of these stakes amounted to $44.70 million. This is compared to 16 hedge funds in the previous quarter with stakes of $53.75 million.
7. Watsco, Inc. (NYSE:WSO)
Number of Hedge Fund Holders: 22
Watsco, Inc. (NYSE:WSO) distributes air conditioning, heating, and refrigeration equipment along with related parts and supplies. The company operates in the United States, Canada, Mexico, and Puerto Rico, and also exports its products to Latin America and the Caribbean Basin. At the end of Q1 2022, 22 hedge funds held stakes in Watsco, Inc. (NYSE:WSO) worth $334.33 million. This is compared to 31 positions in the preceding quarter with stakes worth $445.55 million.
On July 27, Baird analyst David Manthey raised his price target on Watsco, Inc. (NYSE:WSO) to $323 from $313 and reiterated a buy-side Outperform rating on the shares.
As of March 31, Markel Gayner Asset Management owns more than 0.41 million shares of Watsco, Inc. (NYSE:WSO) and is the largest shareholder in the company. The fund’s stakes in Watsco, Inc. (NYSE:WSO) are valued at $127.56 million.
6. Lennox International Inc. (NYSE:LII)
Number of Hedge Fund Holders: 28
Lennox International Inc. (NYSE:LII) designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. The company operates through three segments: Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration.
On July 8, Lennox International Inc. (NYSE:LII) declared a quarterly cash dividend of $1.06 per share. The dividend is payable on September 15 to investors of record at the close of business on August 31. As of July 27, Lennox International Inc. (NYSE:LII) has a forward dividend yield of 1.89%, which the company supports with trailing twelve-month free cash flows of $327.20 million.
On July 13, Deutsche Bank analyst Nicole DeBlase lowered her price target on Lennox International Inc. (NYSE:LII) to $292 from $335 and reiterated a Buy rating on the shares.
At the end of the first quarter of 2022, 28 hedge funds held stakes in Lennox International Inc. (NYSE:LII). The total value of these stakes amounted to $546.04 million. This is compared to 24 positions in the fourth quarter of 2021 with stakes worth $649.92 million.
In the first quarter of 2022, Impax Asset Management raised its stakes in Lennox International Inc. (NYSE:LII) by 5%, bringing them to $143.92 million. As of March 31, Impax Asset Management owns over 0.56 million shares of Lennox International Inc. (NYSE:LII) and is the largest shareholder in the company.
Greenhouse gas emissions from industrial operations are catalyzing global warming. Businesses are becoming more cautioned about the situation and and restructuring their operations to become more eco-friendly. Some large-cap companies such as Microsoft Corporation (NASDAQ:MSFT), Exxon Mobil Corporation (NYSE:XOM), and Ford Motor Company (NYSE:F) have made it their top priority to meet their green energy goals by 2030.
5. Whirlpool Corporation (NYSE:WHR)
Number of Hedge Fund Holders: 33
Whirlpool Corporation (NYSE:WHR) manufactures and markets home appliances and related products which include refrigerators, freezers, ice makers, and HVAC systems. The company has operations in North America, Europe, the Middle East, Africa, Latin America, and Asia. On July 15, JPMorgan analyst Michael Rehaut lowered his price target on Whirlpool Corporation (NYSE:WHR) to $191 from $227 and reiterated a buy-side Overweight rating on the shares.
On July 25, Whirlpool Corporation (NYSE:WHR) released earnings for the fiscal second quarter of 2022. The company generated a revenue of $5.10 billion for the quarter and reported earnings per share of $5.97, ahead of Wall Street consensus by $0.68.
As of March 31, Greenhaven Associates owns over 2.83 million shares of Whirlpool Corporation (NYSE:WHR) and is the largest shareholder in the company. The fund’s stakes were valued at $489.59 million.
At the end of the first quarter of 2022, 33 hedge funds were eager on Whirlpool Corporation (NYSE:WHR) and held stakes worth $962.67 million in the company. This is compared to 28 positions in the previous quarter with stakes of $1.18 billion.
4. Trane Technologies plc (NYSE:TT)
Number of Hedge Fund Holders: 38
Trane Technologies plc (NYSE:TT) provides services and solutions for heating, ventilation, air conditioning, and transport refrigeration. The company offers air conditioners, exchangers, and handlers, coils & condensers, home automation products, humidifiers ice energy storage solutions among other products. On July 15, Jefferies analyst Stephen Volkmann lowered his price target on Trane Technologies plc (NYSE:TT) to $140 from $160 and reiterated a Hold rating on the shares.
On June 3, Trane Technologies plc (NYSE:TT) declared a quarterly cash dividend of $0.67 per share. The dividend is payable on September 30 to shareholders of record at the close of business on September 2. As of July 27, Trane Technologies plc (NYSE:TT) has a forward dividend yield of 1.93% and trailing twelve-month free cash flows of $886.10 million.
At the end of Q1 2022, 38 hedge funds were bullish on Trane Technologies plc (NYSE:TT). The total stakes of these hedge funds amounted to $1.79 billion. This is compared to 27 hedge funds in Q4 2021 with stakes worth $1.26 billion.
In the first quarter of 2022, Generation Investment Management raised its stakes in Trane Technologies plc (NYSE:TT) by 153%, bringing them to $566.48 million. As of March 31, Generation Investment Management owns over 3.7 million shares of Trane Technologies plc (NYSE:TT) and is the largest shareholder in the company.
ClearBridge Investments, an investment management firm, mentioned Trane Technologies plc (NYSE:TT) in its “Sustainability Leaders Strategy” first-quarter 2022 investor letter. Here is what the firm had to say:
“Trane Technologies (NYSE:TT), another energy efficiency play in the industrials sector that should benefit from trends highlighted in the REPowerEU energy security plan, was a top detractor for the quarter, mainly due to continued supply chain headwinds raising costs. We think there is a strong secular tailwind for the cost and emissions savings Trane provides: the company makes products that help reduce energy consumption and emissions for residential and commercial HVAC and transport refrigeration, the minimization of food waste and other perishable goods and the increased productivity for Trane’s customers. Trane estimates ~15%-25% of all greenhouse gas emissions in the world are emitted through HVAC systems and buildings.”
3. Carrier Global Corporation (NYSE:CARR)
Number of Hedge Fund Holders: 42
Carrier Global Corporation (NYSE:CARR) provides heating, ventilation, and air conditioning systems, refrigeration, fire, security, and building automation technologies worldwide. The company operates through three business segments: HVAC, Refrigeration, and Fire & Security. On July 15, Jefferies analyst Stephen Volkmann trimmed his price target on Carrier Global Corporation (NYSE:CARR) to $47 from $55 and reiterated a Buy rating on the shares.
On June 9, Carrier Global Corporation (NYSE:CARR) announced that its board of directors have declared a quarterly cash dividend of $0.15 per share of the company’s common stock. The dividend is payable on August 10 to shareholders of record on June 23. As of July 27, Carrier Global Corporation (NYSE:CARR) has a forward dividend yield of 1.58% and free cash flows of $1.50 billion.
In the first quarter of 2022, Renaissance Technologies raised its stakes in Carrier Global Corporation (NYSE:CARR) by 126%. As of March 31, the fund owns more than 5.3 million shares of the company which amounts to a stake of $243.42 million. Renaissance Technologies is the largest shareholder in Carrier Global Corporation (NYSE:CARR).
At the end of the first quarter of 2022, 42 hedge funds were long Carrier Global Corporation (NYSE:CARR) and held stakes worth $1.14 billion in the company. This is compared to 45 positions in the previous quarter with stakes worth $1.24 billion.
2. Johnson Controls International plc (NYSE:JCI)
Number of Hedge Fund Holders: 44
Johnson Controls International plc (NYSE:JCI) produces fire, HVAC, and security equipment for buildings and provides solutions and services for the HVAC industry in the United States, Europe, the Asia Pacific, and internationally. The company operates in four segments: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia Pacific, and Global Products.
On July 18, Mizuho analyst Brett Linzey lowered his price target on Johnson Controls International plc (NYSE:JCI) to $65 from $68 and reiterated a Buy rating on the shares.
On June 8, Johnson Controls International plc (NYSE:JCI) declared a quarterly cash dividend of $0.35 per share. The common stock cash dividend was payable on July 15 to investors of record on June 21. As of July 28, Johnson Controls International plc (NYSE:JCI) has a forward dividend yield of 2.77% and trailing twelve-month free cash flows of $1.06 billion.
At the end of Q1 2022, 44 hedge funds were eager on Johnson Controls International plc (NYSE:JCI). The total stakes of these hedge funds were valued at $1.43 billion, up from $1.22 billion in the previous quarter with 42 positions. The hedge fund sentiment for the stock is positive.
Saturna Capital, an investment management firm, mentioned Johnson Controls International plc (NYSE:JCI) in its “Amana Funds” fourth-quarter 2021 investor letter. Here is what the firm had to say:
“Given market strength, every sector provided positive returns during the quarter, led by Technology. Hardware and semiconductors were the primary contributors, although software performed better in terms of stock selection. Industrials, Consumer Staples, and Consumer Discretionary were standouts in terms of stock selection and outperformance versus the benchmark. Johnson Controls and railways led in Industrials.”
1. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Holders: 45
Emerson Electric Co. (NYSE:EMR) operates as a technology and engineering company and provides various solutions for customers in industrial, commercial, and residential markets in the Americas, Asia, the Middle East, Africa, and Europe. The company offers a range of smart products and solutions for the HVAC industry which include heating controls, thermostats, and air conditioning controls, among others.
On July 13, Deutsche Bank analyst Nicole DeBlase lowered her price target on Emerson Electric Co. (NYSE:EMR) to $97 from $110 and reiterated a Buy rating on the shares.
As of March 31, Millennium Management owns more than 2.1 million shares of Emerson Electric Co. (NYSE:EMR) and is the largest shareholder in the company. The fund’s stakes are valued at $207.50 million.
At the end of Q1 2022, 45 hedge funds held stakes in Emerson Electric Co. (NYSE:EMR) worth $1.47 billion. This is compared to 43 positions in the previous quarter with stakes worth $1.47 billion.
You can also take a look at 10 Best Climate Change Stocks to Buy Now and 20 Best Countries To Live Considering Climate Change.
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Disclosure: None. 10 Stocks That Will Benefit from Record Breaking Temperatures is originally published on Insider Monkey.
