In this article, we take a look at the 11 best manufacturing stocks to invest in.
The manufacturing industry took a major blow and deteriorated with the onset of the coronavirus pandemic. The global supply chain disruption caused a scarcity of raw materials worldwide, which in turn caused manufacturing processes around the world to come to a stop. With nationwide lockdowns in place all over the world, the demand for electronics, automobiles, airplanes, and other industrial products declined.
The distribution of vaccines helped in getting the pandemic under control which led to the reopening of businesses worldwide. The manufacturing industry is set for a steady recovery. Economic activity in the manufacturing sector has witnessed growth in September. According to the Manufacturing ISM Report On Business, the manufacturing PMI was reported to be at 61.1 percent in September, up by 1.2 percentage points from the August PMI of 59.9 percent. This shows expansion in overall economic activity for 16 months in a row after the contraction in April 2020.
As the manufacturing industry is set for recovery and economic growth, it becomes evident that now is the time to invest in manufacturing stocks. Some of the most popular manufacturing stocks that have caught the attention of investors are 3M Company (NYSE:MMM), Tesla Inc. (NASDAQ:TSLA), and Lockheed Martin Corporation (NYSE:LMT).
Our Methodology:
We, at Insider Monkey, keep track of 867 hedge funds as of the third quarter of 2021. We picked the manufacturing stocks that were popular among these hedge funds and investor circles to compile our list of the 11 best manufacturing stocks to invest in.
Best Manufacturing Stocks to Invest In
11. Kennametal Inc. (NYSE:KMT)
Number of Hedge Fund Holders: 19
Kennametal Inc. (NYSE:KMT) develops tungsten carbides, ceramics, and super-hard materials and solutions for use in metal cutting and extreme wear applications to enable customers to work against corrosion and high temperature conditions worldwide. It operates through two segments, Metal Cutting and Infrastructure. Kennametal Inc. (NYSE:KMT) was founded in 1938 and is based in Pittsburgh, Pennsylvania.
Ariel Investments owns the most shares of Kennametal Inc. (NYSE:KMT). As of this September, the fund’s stake in the company is roughly $299.26 million and it owns more than 8.7 million shares of the company.
Kennametal Inc. (NYSE:KMT) was upgraded to Neutral from Underperform in October by BofA analyst Ross Gilardi. The analyst assigned a $45 price target to the stock as well.
By the end of the third quarter, Insider Monkey identified 19 hedge funds that had stakes in Kennametal Inc. (NYSE:KMT).
10. Plug Power, Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 20
Plug Power, Inc. (NASDAQ:PLUG) provides hydrogen fuel cell turnkey solutions for the electric mobility and stationary power markets in North America and Europe. The company offers its products to retail distribution and manufacturing businesses through a direct product sales force, original equipment manufacturers, and dealer networks. Plug Power, Inc. (NASDAQ:PLUG) was founded in 1997 and is headquartered in Latham, New York.
On October 29th, Piper Sandler analyst Pearce Hammond raised his price target on Plug Power, Inc. (NASDAQ:PLUG) to $46 from $37 and reiterated an Overweight rating on the shares.
This September, Plug Power, Inc. (NASDAQ:PLUG) turned over $124.56 million in quarterly revenues and effectively beat revenue estimates by $13.35 million. This represents a growth of 82.98% year over year.
D E Shaw is the leading stakeholder in the company. According to Insider Monkey’s data, as of 30th September, Mr. Shaw owns 7.52 million shares of the company which are worth over $192.29 million. The investment covers 0.17% of Mr. Shaw’s 13F portfolio.
By the end of the third quarter of 2021, 20 hedge funds out of the elite 867 funds tracked by Insider Monkey held stakes in Plug Power, Inc. (NASDAQ:PLUG), worth $360.4 million.
Just like 3M Company (NYSE:MMM), Tesla Inc. (NASDAQ:TSLA), and Lockheed Martin Corporation (NYSE:LMT), Plug Power, Inc. (NASDAQ:PLUG) is one of notable stocks gaining the attention of hedge funds.
9. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Holders: 41
Emerson Electric Co. (NYSE:EMR) designs and manufactures technology and engineering products for industrial, commercial, and consumer markets worldwide. It operates through Automation Solutions and Commercial & Residential Solutions segments. Emerson Electric Co. (NYSE:EMR) was founded in 1890 and is headquartered in St. Louis, Missouri.
This October, UBS analyst Markus Mittermaier maintained his Buy rating and $113 price target on Emerson Electric Co. (NYSE:EMR) after the company announced its collaboration with AspenTech (NASDAQ:AZPN) with regards to its industrial software business.
By the end of the third quarter of 2021, 41 hedge funds out of the elite 867 elite funds tracked by Insider Monkey held stakes in Emerson Electric Co. (NYSE:EMR) worth $671 million.
According to data from September 2021, AQR Capital Management was the key stakeholder in Emerson Electric Co. (NYSE:EMR). The hedge fund’s stake in the company was a whopping $157.2 million, which accounts for 0.29% of its 13F portfolio.
8. International Business Machines Corp. (NYSE:IBM)
Number of Hedge Fund Holders: 41
International Business Machines Corp. (NYSE:IBM) provides integrated solutions and services worldwide. The company operates through the following segments: Cloud & Cognitive Software, Global Business Services, Global Technology Services, Systems, and Global Financing. International Business Machines Corp. (NYSE:IBM) was incorporated in 1911 and is headquartered in Armonk, New York.
Arrowstreet Capital has a leading stake in International Business Machines Corp. (NYSE:IBM). According to the September filings, the fund’s stake in the company is in excess of $398.16 million.
On 28th October, Credit Suisse analyst Dan Knauff assumed coverage of International Business Machines Corp. (NYSE:IBM) and assigned it an Outperform rating and $172 price target.
Insider Monkey’s database tracks 867 elite hedge funds, of which 41 held stakes in International Business Machines Corp. (NYSE:IBM) at the end of the third quarter of 2021. The total value of these stakes was roughly $1.40 billion.
7. Honeywell International Inc. (NYSE:HON)
Number of Hedge Fund Holders: 45
Honeywell International Inc. (NYSE:HON) operates as a diversified technology and manufacturing company worldwide. The company’s primary segments include aerospace, building technologies, performance materials and technologies, and safety and productivity solutions. Honeywell International Inc. (NYSE:HON) was incorporated in 1985 and is headquartered in Charlotte, North Carolina.
This October, Wells Fargo analyst Joseph O’Dea assigned Honeywell International Inc. (NYSE:HON) an Equal Weight rating and a $229 price target. The company also announced the approval of an increase in the company’s regular annual cash dividend from $3.72 per share to $3.92 per share.
By the end of the third quarter of 2021, Honeywell International Inc. (NYSE:HON) was a part of 45 investment portfolios.
For the third quarter of 2021, Honeywell International Inc. (NYSE:HON) reported earnings per share of $2.02, beating estimates by $0.02. The company’s revenue has grown 8.67% year over year to $8.47 billion. As of September 30th, Diamond Hill Capital has the highest stakes in the company, worth $231.51 million.
ClearBridge Investments, an investment management firm, published its “Large Cap Value Strategy” first quarter 2021 investor letter, in which it mentioned Honeywell International Inc. (NYSE:HON). Here’s what ClearBridge Investments had to say:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included industrials, Honeywell also lagged in the quarter after previously generating strong returns over extended periods.”
6. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 46
The share price for Caterpillar Inc. (NYSE:CAT) has gained 12% year to date. The company released its third-quarter earnings for 2021 in September. According to their quarterly report, Caterpillar Inc. (NYSE:CAT) has claimed an EPS of $2.60, beating estimates by $0.46. The company’s revenue has grown by 25.46% year over year and came in at $12.40 billion.
On October 26th, Baird analyst Mircea Dobre kept his Outperform rating and $270 price target on Caterpillar Inc. (NYSE:CAT) in light of its third-quarter earnings.
Bill & Melinda Gates Foundation Trust holds the most shares of Caterpillar Inc. (NYSE:CAT) among the 867 funds tracked by Insider Monkey. As of September 30th, the fund owns more than 9.68 million shares of the manufacturing company, which brings its total stake in Caterpillar Inc. (NYSE:CAT) to roughly $1.85 billion.
There were 46 hedge funds that held stakes in Caterpillar Inc. (NYSE:CAT) worth $4.77 billion by the end of the third quarter of 2021.
Oakmark Funds, an investment management firm, published its “Oakmark Fund” second quarter 2021 investor letter, in which it mentioned Caterpillar Inc. (NYSE:CAT) and shared its insights on the stock. Here’s what they had to say:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
Caterpillar Inc. (NYSE:CAT) is a good manufacturing stock to consider investing in as of now. Other popular stocks are 3M Company (NYSE:MMM), Tesla Inc. (NASDAQ:TSLA), and Lockheed Martin Corporation (NYSE:LMT).
5. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 46
3M Company (NYSE:MMM) develops, manufactures, and markets various products worldwide. It operates through four primary segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. This November, 3M Company (NYSE:MMM) announced its collaboration with Mobileye, a subsidiary of Intel Corporation (NASDAQ:INTC), to make advancements in road safety by delivering a crowdsourced infrastructure asset data to transportation agencies through the 3M Roadway Safety Asset Manager platform.
On October 11th, Langenberg analyst Brian Langenberg upgraded 3M Company (NYSE:MMM) to Buy from Hold and reiterated his price target of $210.
By the end of the third quarter of 2021, Insider Monkey identified 3M Company (NYSE:MMM) to be a part of 46 hedge fund portfolios. The total stakes of these hedge funds in the company were more than $1.62 billion, up from $1.58 billion in the previous quarter with 42 positions.
4. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 50
The Boeing Company (NYSE:BA) designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The company operates through four segments: Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital.
In October, RBC Capital initiated coverage of The Boeing Company (NYSE:BA) and assigned it an Outperform rating with a $275 price target.
Out of the elite 867 hedge funds tracked by Insider Monkey, 50 hedge funds held stakes in The Boeing Company (NYSE:BA) by the end of the third quarter of 2021. The total value of these stakes was $1.43 billion.
According to Insider Monkey’s data, Renaissance Technologies is the key shareholder in The Boeing Company (NYSE:BA) as of September 30th.
3. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 51
Lockheed Martin Corporation (NYSE:LMT) operates as a security and aerospace company that actively engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
On November 5th, Lockheed Martin Corporation (NYSE:LMT) was awarded a $10.86 billion contract for Advanced Raptor Enhancement & Sustainment (ARES), for the F-22 Program Office.
By the end of the third quarter of 2021, Israel Englander of Millennium Management owned more than 561,000 shares of the company, which are worth $193.77 million.
2. Builders FirstSource, Inc. (NYSE:BLDR)
Number of Hedge Fund Holders: 53
Builders FirstSource, Inc. (NYSE:BLDR) manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States. The company operates through four segments: Northeast, Southeast, South, and West. Builders FirstSource, Inc. (NYSE:BLDR) was founded in 1998 and is based in Dallas, Texas.
Builders FirstSource, Inc. (NYSE:BLDR) reported its third-quarter earnings per share to be $3.39, beating expert estimates by $1.76. The company’s revenue grew by 139.98% year over year and was calculated to be $5.51 billion, beating revenue estimates by $683.59 million.
This November, BMO Capital analyst Ketan Mamtora raised his price target on Builders FirstSource, Inc. (NYSE:BLDR) to $76 from $67 and reiterated an Outperform rating on the shares after its third-quarter earnings beat estimates.
Builders FirstSource, Inc. (NYSE:BLDR) was a part of 53 hedge funds’ investment portfolios by the end of the third quarter of 2021. These hedge funds had total stakes worth $2.21 billion in the company.
According to the September filings, Coliseum Capital is the leading shareholder in Builders FirstSource, Inc. (NYSE:BLDR). The fund has stakes worth $460.62 million in the company.
Merion Road Capital Management, an investment management firm, published its third-quarter 2021 investor letter, in which it mentioned Builders FirstSource, Inc. (NYSE:BLDR). Here’s what the experts at Merion Road Capital Management had to say:
“I added to our position in Builder’s FirstSource (“BLDR”) during the quarter. BLDR is the largest national supplier of structural building products and value-added components to the residential construction market. They have been active in consolidating the industry, most notably with the merger of BMC earlier this year. Like other distributors, BLDR benefits from scale advantages that afford them a robust product offering, enhanced purchasing power, and fixed cost leverage. They will continue to acquire smaller competitors and have announced 5 new deals so far this year.
I view the strategic benefit of these acquisitions in three different buckets. There are the core tuck-in acquisitions of facilities and customer lists that increase scale and geographic reach. An example would be the company’s May acquisition of John’s Lumber, a lumber and specialty product distributor serving the Detroit MSA, at 0.5x revenue. There are product acquisitions that leverage their platform to increase distribution and improve the product offering. For instance, last month BLDR announced the acquisition of California TrusFrame, a designer and manufacturer of prefabricated components like trusses and wall panels, at 1.3x revenue. And lastly BLDR has begun investing in software and services. In June they spent $450mm on the purchase of WTS Paradigm, a software company that addresses the complexity around building configuration, estimating, and manufacturing, at 9.0x revenue. By utilizing software to in the planning process, WTS Paradigm cuts down on material and labor waste, ensures an optimal fit of product and design, and eases the contractor’s workload. BLDR has followed this up with a much smaller software acquisition in September.
BLDR is in the very early innings of their software investment, so it is difficult to pinpoint exactly how it will impact the company in the coming years. Management believes that there is a lot of low hanging fruit, pointing to a McKinsey study ranking the construction industry as second to last on overall digitization. If anyone has had any work done to their house, I am sure they can anecdotally attest to this. BLDR plans to leverage WTS Paradigm to increase internal productivity (i.e. improved estimating leading to fewer visits to the job site), cross-sell the software to existing clients, and drive greater adoption of value-added products. So thinking a few years out I think the goal would be to have higher margins on their commodity business, a greater mix of revenue coming from value added products, a stronger relationship with their customer, and an enhanced competitive advantage…”
1. Tesla Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Tesla Inc. (NASDAQ:TSLA) designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. Tesla Inc. (NASDAQ:TSLA) was founded in 2003 and is headquartered in Palo Alto, California.
ARK Investment Management is the largest shareholder in Tesla Inc.’s (NASDAQ:TSLA) stock. As of September 30th, the fund is in possession of over 3.95 million shares of Tesla Inc. (NASDAQ:TSLA), which brings its total stake to $3.06 billion.
On 8th November, Jefferies analyst Philippe Houchois raised his price target on Tesla Inc. (NASDAQ:TSLA) to $1,400 from $950 and reiterated a Buy rating on the shares.
By the end of the third quarter of 2021, 60 hedge funds in Insider Monkey’s database held stakes in Tesla Inc. (NASDAQ:TSLA), worth $10.64 billion. This is compared to 60 hedge funds in the first quarter, which had total stakes worth $9.29 billion in the company.
Here’s what Worm Capital LLC, had to say about Tesla Inc. (NASDAQ:TSLA) in their third-quarter 2021 investor letter:
“Our core portfolio as of this writing—TSLA, SPOT, SHOP, ABNB, and AMZN—are all premier examples of companies that use the concept of aggregation of marginal gains to continuously improve their value proposition for customers. After all, what is innovation if not just a continuous search for fractional advantages in business?
The way we see it, Tesla is perhaps the generational example of the marginal gain aggregation theory. It’s also been our largest position for several years now. There are many ways to characterize and value this business (see previous letters for longform write-ups), but perhaps the best way to think about the company is that it is a highly vertically-integrated software and hardware firm that’s devoted entirely to aggregating marginal gains across its organization. The goal? Lower costs, improve thruputs, and dramatically enhance the value proposition—at scale—for consumers…”
You can also look at 10 Best Stocks Under $10 to Buy Right Now and 11 Best Lithium and Battery Stocks To Buy.
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Disclosure: None. 11 Best Manufacturing Stocks to Invest In is originally published on Insider Monkey.
