We recently compiled a list of the 10 Best Industrial Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Parker-Hannifin Corporation (NYSE:PH) stands against the other industrial stocks.
Industrial stocks in the United States encompass a broad range of sectors including manufacturing, transportation, aerospace, defense, and construction. These sectors form the backbone of the American economy, driving innovation, employment, and growth. Companies within this category often engage in the production of machinery, equipment, and infrastructure essential for various industries. The performance of industrial stocks is closely tied to the overall health of the economy. Economic expansion typically boosts demand for industrial goods and services, while recessions can lead to contractions in this sector.
Recently, industrial stocks have shown resilience amid global supply chain disruptions and economic uncertainty, thanks in part to technological advancements and diversified service offerings. Advancements in automation, robotics, and artificial intelligence are transforming the industrial landscape. Companies are increasingly investing in smart manufacturing technologies to enhance productivity and reduce operational costs. Environmental concerns and regulatory pressures are pushing industrial firms toward sustainable practices. Companies are adopting greener technologies and renewable energy sources to meet regulatory standards and consumer expectations. Industrial stocks play a vital role in the US economy, offering a diverse range of investment opportunities. Understanding the dynamics of different sectors, keeping abreast of market trends, and evaluating economic indicators are crucial for making informed investment decisions in this space. With continued advancements in technology and a focus on sustainable practices, the industrial sector remains a critical and evolving component of the financial market landscape. Overall, industrial stocks returned close to 10% so far in 2024.
According to Federal Reserve Industrial Production and Capacity Utilization report, most major market groups saw gains in May. Consumer goods increased by 1.3 percent, driven by rises across all components except home electronics. Business equipment edged up by 0.2 percent despite a drop in transit, buoyed by gains in information processing and industrial sectors. Defense and space equipment rose by 1.0 percent, marking a nearly 10 percent increase from a year ago. The materials market group saw a 0.8 percent increase, with non-energy durables and non-energy nondurables each up by around 1 percent, and energy materials rising by 0.6 percent. In manufacturing, overall output rose by 0.9 percent in May, slightly above last year’s level. Durable manufacturing increased by 0.6 percent, nondurables by 1.1 percent, and other manufacturing (publishing and logging) by 0.2 percent. Within durable manufacturing, notable gains were seen in wood products (up 2.6 percent), machinery (up 2.3 percent), and computer/electronic products (up 0.8 percent). Furniture and related products saw the largest decline (down 2.6 percent). In nondurables, printing and support activities decreased by 1.5 percent, while other categories saw gains. Mining output rebounded with a 0.3 percent increase in May, following declines in the previous two months. Oil and gas extraction rose, offsetting decreases in other mining and support activities. Utilities output grew by 1.6 percent, surpassing last year’s level by 3.9 percent. Capacity utilization for manufacturing rose to 77.1 percent in May, slightly below its long-run average. Mining’s operating rate reached 92.7 percent, well above its average, while utilities remained notably below their typical operating levels despite a slight increase to 71.5 percent.
So, what are the best industrial stocks to buy in this current environment?
Our Methodology
We leveraged Insider Monkey’s comprehensive database of 920 prominent hedge funds to identify the top 10 industrial stocks with the highest level of hedge fund investment as of Q1 2024. These stocks are listed in order of increasing hedge fund ownership, providing insight into the most popular industrial stocks among elite investors.
A robotic arm in a factory demonstrating the application of motion control technologies.
Parker-Hannifin Corporation (NYSE:PH)
Number of Hedge Funds Holders: 63
Parker-Hannifin Corporation (NYSE:PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. Parker-Hannifin Corporation (NYSE:PH) is thriving in commercial and military sectors, particularly in OEM and aftermarket channels. In Q3 FY 2024, its Aerospace Systems segment saw an 18% organic sales increase year-over-year, driven by strong demand in general aviation and military markets. Strategic acquisitions, like Meggitt plc in September 2022, expanded its customer base and global reach, contributing to a 3.4% sales rise in the first nine months of FY 2024. Parker-Hannifin’s Win Strategy boosted the segment’s adjusted operating margin to 24.7%, up 150 basis points. Moreover, Parker-Hannifin Corporation (NYSE:PH) is prioritizing shareholder returns with an 11.4% increase in dividends year-over-year and a 10% quarterly dividend raise in April 2024.
On June 17, Wells Fargo analyst Joe O’Dea affirmed a Buy rating on Parker-Hannifin Corporation (NYSE:PH) and established a price target of $630.00. As of June 19 closing, the company’s shares were valued at $506.83. In the first quarter of 2024, there were 63 hedge funds holding positions in Parker-Hannifin Corporation (NYSE:PH), consistent with the previous quarter according to Insider Monkey’s database. The total value of these holdings is approximately $2.28 billion. Ric Dillon’s Diamond Hill Capital held the largest stake among these hedge funds during this period.
Diamond Hill Capital Mid Cap Strategy stated the following regarding Parker-Hannifin Corporation (NYSE:PH) in its first quarter 2024 investor letter:
“Other top Q1 contributors included Parker-Hannifin Corporation (NYSE:PH). Diversified industrial and aerospace manufacturer Parker-Hannifin’s industrial business orders typically turn positive after five or six quarters of order declines. Accordingly, shares rose in Q1 in anticipation of a new cycle, implying a strong recovery for the company in the forthcoming calendar year.”
Overall PH ranks 9th on our list of the best industrial stocks stocks to buy. You can visit 10 Best Industrial Stocks to Buy According to Hedge Funds to see the other industrial stocks that are on hedge funds’ radar. While we acknowledge the potential of PH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
