We recently published a list of 10 Best Industrial Stocks to Invest in Now. In this article, we are going to take a look at where Parker-Hannifin Corporation (NYSE:PH) stands against other best industrial stocks to invest in now.
Industrial stocks were on a roll in 2024 as the overall sector ended the year up 26% on navigating deteriorating economic conditions, geopolitical uncertainty and heightened inflation. At the same time, a slowing Chinese economy was expected to hurt sentiments in the sector, but that was not the case.
Fast forward, the outlook in the industrial sector remains optimistic despite growing concerns about trade tariffs that could affect deals and operations. US President Donald Trump has threatened to impose a new 25% tariff on all steel and aluminum imports.
Trump’s trade policy overhaul would involve a significant increase in tariffs on top of the current metals duties. According to data from the American Iron and Steel Institute and the government, South Korea, Vietnam, Brazil, and Canada are the top three countries from which the United States imports steel. As a result, the tariffs have the potential to shake the nation’s industrial sector.
“Canadian steel and aluminum support key industries in the U.S. from defense, shipbuilding and auto. We will continue to stand up for Canada, our workers, and our industries,” Canadian Innovation Minister Francois-Philippe Champagne posted on X.
Nevertheless, there is growing optimism that a return of manufacturing to the US from other countries amid the trade tariffs would be a boon for the sector. Activities in the industrial sector are expected to improve significantly amid the growing push to reinvest in domestic infrastructure.
The need to bring supply chains onshore to avert the ever-growing geopolitical risk is another factor that should bolster sentiments in the industrial sector. Additionally, heightened investments in electrification and the development of artificial intelligence should also have a positive impact. The fact that only a quarter of the $1.9 trillion worth of projects announced since 2020 have entered into the construction phase underscores the tremendous opportunities around industrial stocks.
The expected surge in spending on domestic manufacturing under the new administration should greatly benefit equipment rental specialists’ electrical equipment companies, among others. The commercial aerospace sector is another segment expected to be on a roll after years of slowdown following the COVID-19 pandemic. A shortage of new planes as travel recovers is presenting tremendous opportunities for companies in the aerospace segment.
Interest rate cuts as part of an effort to steer the economy into a soft landing is another tailwind that should positively impact the industrial sector in 2025. Lower interest rates are expected to stimulate the housing sector on mortgage dropping, therefore attracting more home buyers. The net effect should be a strong demand for building materials and equipment that benefit construction companies and those in the repair and remodeling business.
Additionally, the industrial sector could receive a significant boost from China coming through on a new economic stimulus and major structural changes. Such a move is expected to boost activities in the sector and increase demand for raw materials and equipment, which should bolster the industrial sector.
“The sentiment around the China market obviously has been pretty poor, not just recently, but for some time now. I think investors are ignoring some of these positive developments,” said Andrew Swan, head of Asia equities at Man Group
Trump’s trade policies, lower interest rates, and China’s economic stimulus are some of the tailwinds likely to impact the global industrial sector positively. A resilient US and global economy that steers clear of recession amid low interest rates are some of the reasons to be optimistic about the overall industrial sector outlook.
Our Methodology
We scanned the US stock market using a screener and analyzed online rankings to compile the list of the 10 best industrial stocks to invest in now. We filtered out those with high hedge fund holdings from an initial list of 25-30 stocks. The final stocks are arranged in ascending order of hedge fund sentiments as of Q3 2024. We also focused on stocks with strong fundamentals and significant long-term investment potential.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Parker-Hannifin Corporation (PH) the Best Industrial Stock to Invest in Now?
A robotic arm in a factory demonstrating the application of motion control technologies.
Parker-Hannifin Corporation (NYSE:PH) is a specialty industrial machinery company that manufactures and sells motion and control technologies and systems for mobile, industrial, and aerospace markets. The industrial stock has consistently outperformed the overall market, going by a 34% gain in 2024. Likewise, the stock is already up by about 9%.
The stellar performance stems from Parker-Hannifin Corporation’s (NYSE:PH) ability to navigate industrial downturns. It has also experienced steady growth due to acquisitions and a stronger emphasis on long-lasting products that capitalize on secular trends like electrification and digitization. Parker Hannifin’s dominance of motion and control technologies supports its solid market position. The company has a competitive advantage due to its substantial presence in the aerospace industry, particularly given the continued strength of the commercial aerospace cycle.
Over the past ten years, Parker-Hannifin Corporation (NYSE:PH) has effectively diversified its portfolio, lowering its susceptibility to changes in specific markets. In particular, the aerospace sector is expected to continue growing. Even though double-digit growth rates might not last forever, the performance of this segment is well-supported by the robust commercial cycle. Analysts predict that between 2024 and 2027, the organic growth CAGR will be 6.7%, while the operating margin will increase by 268 basis points during that time.
Overall, PH ranks 2nd on our list of best industrial stocks to invest in now. While we acknowledge the potential of PH to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
