To many investors, manufacturing stocks are boring, old-school investments that can’t provide the growth that sexier industries like software or biotech can. But while there may not be outsized growth in a midsize machine parts company, there is upside in a few corners of the manufacturing industry right now — if you know where to look.
In 2024, those more attractive segments include housing-related plays banking on a rebound in construction and high-tech manufacturing stocks capitalizing on some of the biggest themes on Wall Street right now.
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The following manufacturing stocks show their potential, with gains of 50% or more in the last 12 months and momentum that hints there may still be future upside. Here are seven of the best manufacturing stocks to buy now:
— Advanced Drainage Systems Inc. (ticker: WMS)
— Builders FirstSource Inc. (BLDR)
— Eaton Corp. PLC (ETN)
— Parker-Hannifin Corp. (PH)
— Trane Technologies PLC (TT)
— TransDigm Group Inc. (TDG)
— Vertiv Holdings Co. (VRT)
Advanced Drainage Systems Inc. (WMS)
Advanced Drainage Systems manufactures the plastic corrugated pipes and related water management products that are ubiquitous at home improvement stores and on building sites. It also provides higher-priced items, such as septic tanks and specialized drainage products. Homebuilder confidence recently hit the highest level since last summer thanks to a stabilizing interest rate environment and stronger demand from consumers as mortgages have plateaued. And with many expecting the Federal Reserve to pull back on rates sometime this year, lower borrowing costs could fuel greater demand for home construction. That tailwind has lifted WMS stock big time, with shares up 98.4% in a year through April 16, as investors increasingly anticipate strong demand ahead.
Builders FirstSource Inc. (BLDR)
As the name implies, BLDR manufactures and supplies building materials to customers ranging from professional homebuilders to do-it-yourself consumers in the U.S. Products include lumber, wall panels, windows, doors and a host of other materials. The story for BLDR is similar to Advanced Drainage in that a stronger housing market means an uptrend for this manufacturer. But keep in mind that while the current environment is favorable, that’s just compared with a bleak 2023 that featured the slowest pace of home sales in decades. While BLDR stock is up 93% in the last year through April 16, if housing cools off we could see shares once again at risk, so tread carefully.
Eaton Corp. PLC (ETN)
Eaton is a power management company that provides electrical components used across a host of applications, including residential wiring, circuit breakers, fire protection gear and aerospace instruments. In an age of alternative energy, the biggest potential product line at Eaton may be its “microgrid” system that supports renewable power
generation. The firm recently created the largest microgrid in Puerto Rico through a partnership with multinational utility Enel S.p.A. (OTC: ENLAY), illustrating the kind of business it may do more of going forward. Shares are up nearly 100% in the last 12 months thanks to strong investor interest in the growth potential of this electric equipment manufacturer.
Parker-Hannifin Corp. (PH)
PH is a manufacturing stock with a high-tech angle, specializing in motion and control technologies that allow for automation in other industries. That includes energy companies, telecommunications providers, industrial and aerospace firms, and even agribusinesses. From helping build alternative energy arrays to powering smart tractors that can ease the burden on farmers, PH has a product portfolio with some really impressive 21st-century applications. Revenue growth is modest — currently in the mid-single digits — but shares have rallied more than 70% in the last 12 months on hopes of future profits rolling in as Parker-Hannifin meets the emerging demand in these new segments.
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Trane Technologies PLC (TT)
As with some of the other housing-related plays on this list, HVAC and refrigeration specialist Trane is a rebound play that has delivered impressive returns due to a stabilizing real estate market. Shares are up about 70% in the last 12 months thanks to a revitalization of its home air conditioning and furnace business. It also provides commercial thermostat controls, including refrigeration solutions for health care products like vaccines or data center cooling equipment, which also gives it a nice opportunity to capitalize on the strength of these other industries. And at nearly $70 billion in market cap, it’s a leader in this corner of the manufacturing industry that has the scale and staying power to hang tough even if these short-term uptrends lose a bit of steam in the months ahead.
TransDigm Group Inc. (TDG)
TransDigm is a manufacturer and supplier of aircraft components, including airframes, engines and power systems for both commercial and military use. What makes TDG stock so unique in the aerospace industry, however, is that it is run more like a private equity fund
than a traditional manufacturer. It’s a mishmash of a few dozen semi-autonomous units each specializing in unique but critical components — from the high-tech systems that keep a plane in the air to the more workaday parts like aerospace-grade fasteners. Overall, it makes for a unique portfolio of proprietary products. Given the recent focus on wars in Gaza and Ukraine, along with a commercial real estate industry mostly on the rise, TDG is in good shape to do brisk business with its partners in the near future. Wall Street is predicting roughly 17% revenue growth this fiscal year as a result, and shares are up nearly 70% in the last year.
Vertiv Holdings Co. (VRT)
Vertiv is a $32 billion industrial stock that has simply been on a tear lately, with shares up more than 70% this year and more than 560% in the last 12 months. That’s because the specialty of Vertiv is power management products and other digital infrastructure gear that many investors believe are critical to the artificial intelligence revolution. In fact, the CEO of standout chipmaker Nvidia Corp. (NVDA) noted that its firm and Vertiv were working together on cooling systems for data centers. Projected revenue growth for next year is about 11%. But if these big plans do come through for VRT, this could be just the beginning of the potential for this high-tech manufacturing stock.
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7 Best Manufacturing Stocks to Invest in Now originally appeared on usnews.com
Update 04/17/24: This story was previously published at an earlier date and has been updated with new information.
