Is Hubbell Inc. (HUBB) the Next Big Bet in Small-Cap Manufacturing Stocks?

We recently released a list of the 15 Tiny-Market Capitalization Production Companies That Hedge Funds Are Investing In In this piece, we will assess how Hubbell Inc. (NYSE:HUBB) measures up against other small-cap manufacturing companies.

On February 26, Liz Ann Sonders, who serves as the Chief Investment Strategist at Charles Schwab, appeared on CNBC’s 'Squawk on the Street' to address potential slowdowns in manufacturing caused by persistent policy uncertainties. According to her, the prevailing mood in the markets currently centers around apprehensions regarding economic expansion rather than inflationary pressures. During the discussion, she pointed out several softening metrics like consumer confidence polls, retail sales numbers, and service sector Purchasing Managers' Index readings. Additionally, Sonders highlighted that heightened political ambiguity contributes to diminished inclinations towards acquiring significant machinery and equipment, leading businesses to cut back on investments and expenditure strategies. Furthermore, she mentioned that throughout the last twelve months, bond yields have fluctuated based mainly on shifts in inflation reports versus indications of economic progress—whether increasing or decreasing. Recently, this trend saw a dip in yield rates largely attributed to anxieties surrounding an impending deceleration in economic activity instead of forecasts for lower levels of inflation. Consequently, these sentiments have steered investors toward adopting more protective positions across various market segments, underscoring a general atmosphere of wariness among participants.

New Purchasing Managers' Index (PMI) reports indicate a downturn in service activities, whereas manufacturing seems to be gaining momentum. This shift might lead to a favorable alignment between both industries. However, according to Sonders, the recent uptick in manufacturing may face threats because of persistent uncertainties related to government policies. Consequently, numerous businesses within the manufacturing domain are becoming more hesitant regarding prospective investments and expansions. Additionally, Sonders highlighted that although substantial budget reduction talks were initially aimed at cutting down around $2 trillion, only minor decreases, under $10 billion, can currently be seen. In her view, concentrating solely on these limited expenditure cuts would be premature since factors like tariff adjustments, migration regulations, deportation practices, and modifications in oversight rules collectively contribute to reducing economic forecasts and increasing anticipated price hikes. Furthermore, she mentioned that even though alterations in taxation laws are part of current dialogues, they will probably impact next fiscal-year projections instead of influencing short-term trends significantly.

Our Methodology

Initially, we went through financial news articles, along with data from the iShares U.S. Manufacturing ETF and the Vanguard Industrials ETF, plus insider information from Insider Monkey’s Q4 2024 report on hedge fund activities, to create a roster of smaller-sized manufacturing firms that attracted interest among major investors. Herein, "small-cap" refers to companies whose total value ranges from $10 billion to $20 billion as per records dated April 25th. From these listings, we pinpointed the leading 15 enterprises based on their ranking; lower numbers indicate higher investor engagement measured by stake holdings within hedge funds. When multiple equities were backed equally by such investment vehicles, preference was granted according to each firm's overall capitalization size for final sorting purposes.

Why do we focus on the stocks that hedge funds heavily invest in? It's straightforward: our studies indicate that mimicking the top stock choices made by leading hedge funds allows us to surpass market performance. Each quarter, our monthly bulletin recommends 14 small-cap and large-cap stocks, delivering a return of 373.4% since May 2014, which significantly exceeds its benchmark by 218 percentage points. s ee more details here ).

A detailed view of a technician’s hand putting together an electronic gadget.

Hubbell Inc. (NYSE: HUBB )

Market Capitalization on April 25: $19.28 billion

Number of Hedge Fund holders: 38

Hubbell Incorporated (NYSE:HUBB) specializes in designing, manufacturing, and distributing electrical and utility products globally. The company functions via two main divisions: Electrical Solutions and Utility Solutions. Additionally, they create an array of industrial controls and communication systems tailored for applications within non-residential buildings, industry sectors, along with specific fields such as oil & gas extraction and mining operations.

Hubbell expects an organic expansion ranging from 4% to 6% in its Utility Solutions division by 2025, positioning this sector as the top growth driver for the firm. The company's forecast is bolstered by their capacity to leverage increased demand due to electrification along with connection initiatives spanning through transmission systems, substations, and grid protection and control sectors.

While the meters and AMI (Advanced Metering Infrastructure) business within Utility Solutions is expected to decline year-over-year in 2025, Hubbell Inc. (NYSE:HUBB) is confident that both telecom markets and the high-margin utility distribution markets will return to growth within the year. In Q4 2024, the Utility Solutions segment grew its sales by 4%. This was majorly fueled by the acquisition of Systems Control. This acquisition provides turnkey solutions in the substation market.

Overall, HUBB ranks 8th On our roster of small-cap manufacturing equities favored by hedge funds, we recognize the expansion prospects of HUBB. However, our confidence leans towards the notion that artificial intelligence stocks present substantial opportunities for generating significant profits with potentially quicker outcomes. Among these, one particular AI equity has surged year-to-date despite many prominent names in this sector shedding roughly 25% in value. Should you seek an alternative AI investment over HUBB—one that boasts a price-earnings ratio under five—please refer to our detailed analysis outlined in our latest report. cheapest AI stock .

READ NEXT: 20 Top AI Stocks You Should Consider Purchasing Today and 30 Top Stocks to Purchase Currently as Recommended by Billionaires .

Disclosure: There are no conflicts of interest. This article was initially published here. Insider Monkey .