On January 13, GW&K Investment Management’s Global Strategist Bill Sterling shared his views on how a turnaround in the U.S. manufacturing sector, after a few years of struggles, could generate compelling investment opportunities in industrial stocks. Sterling noted that AI/data center advancements have positioned some short-cycle industrial companies to benefit from high operating leverage, where even a slight increase in volume could translate into significant earnings growth. Sterling also reflected on the need for more supportive monetary policy in 2026. He added:
“Manufacturing is both directly and indirectly rate-sensitive. Directly, because financing costs hit equipment purchases and inventory carrying costs; indirectly, because housing and autos — big goods’ ecosystems — move with rates. As the labor market cooled last year, the Fed ended up cutting rates by 75 basis points (bps) in the fourth quarter and futures markets anticipate two to three more cuts this year.”
Industrial Machinery and Supplies stocks offer attractive long-term potential to investors, as these businesses drive economic growth. Lately, the segment has been characterized by advanced automation and infrastructure development, which requires underlying companies to keep up with an evolving landscape. Hence, investors need to have an eye for a robust business model that is driven by a futuristic strategy and is highly adaptive towards such shifts.
With that background, let’s explore our 15 best Industrial Machinery and Supplies stocks to buy according to Hedge Funds.
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Our Methodology
To identify relevant stocks for this article, we conducted a screening of U.S.-listed Industrial Machinery and Supplies companies with market capitalizations above $2 billion. We then added a filter to exclude companies with share prices below $5 to ensure we do not include penny stocks on our list. Also, we shortlisted only stocks with positive upside potential according to TipRanks consensus as of the February 3 closing.
In the final screening step, we identified the number of hedge funds that held positions in these stocks as of the end of the third quarter 2025. Finally, we selected 15 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. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
15. Helios Technologies (NYSE:HLIO)
Number of Hedge Fund Holders: 17
Helios Technologies (NYSE:HLIO) is one of the 15 best Industrial Machinery and Supplies stocks to buy according to Hedge Funds.
On January 26, the price target on Helios Technologies (NYSE:HLIO) was revised from $64 to $74, and the stock was assigned an Overweight rating by KeyBanc analyst Jeffrey Hammond.
The analyst raised his price target based on an optimistic view, which is driven by a mix of end-market improvements and high leverage on volumetric growth. Hammond’s forecast yields a 10% upside potential at the current level.
On January 17, Tomohiko Sano from JPMorgan initiated his coverage on Helios Technologies (NYSE:HLIO), assigning an Overweight rating to the stock. He estimated a target price of $80, resulting in an upside of almost 19%.
Sano is optimistic about the business due to its disciplined capital allocation strategy and organic growth across Hydraulics and Electronics divisions. According to the analyst, the company is also benefiting from a refreshed corporate environment cultivated by CEO Sean Bagan. Following a recent on-site visit by JPMorgan, Sano acknowledged the team’s operational focus and ongoing cultural transformation, that back his bullish stance on the stock.
Helios Technologies (NYSE:HLIO) is an industrial technology company that delivers high-performance electronic and engineered motion-control solutions. The business operates under two segments, Hydraulics and Electronics. Products are sold under various brands, including Sun Hydraulics, NEM, Daman, Murphy, Zero Off, HCT, Joyonway, and Schultes.
14. Donaldson Company (NYSE:DCI)
Number of Hedge Fund Holders: 25
Donaldson Company (NYSE:DCI) is one of the 15 best Industrial Machinery and Supplies stocks to buy according to Hedge Funds.
On February 2, Baird analyst Robert Mason maintained his Outperform rating on Donaldson Company (NYSE:DCI), and also raised his price target on the stock from $100 to $110. His rating and price target revision came after the company’s announcement of its CEO transition, with current COO Richard Lewis set to replace Tod Carpenter, who is retiring.
Back on January 9, Jefferies also upgraded its rating on Donaldson Company (NYSE:DCI) from Hold to Buy. Moreover, the firm adjusted its price target from $92 to $120, implying an upside of nearly 19%. Such bullish revisions were based on recovery indicators witnessed across mining and non-residential construction markets. Going forward, Jefferies expects a favorable credit environment along with fiscal stimulus that will be a catalyst for the company’s gas turbine, industrial, and truck markets.
Donaldson Company (NYSE:DCI) produces and sells technology-led filtration systems and replacement parts across the globe. The business is trifurcated into Mobile Solutions, Industrial Solutions, and Life Sciences segments, and serves various markets including agriculture, defense, and manufacturing. Its offerings include air filtration, hydraulic and emissions systems, sensors, air inlet systems, ancillary components, and replacement parts.
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