Is IDEX Corp. (NYSE:IEX) the Next Big Thing in Manufacturing Stocks That Hedge Funds Are Snatching Up?

We recently released a compilation of the 15 Little-Known Manufacturing Companies That Hedge Funds Are Investing In In this piece, we will examine how IDEX Corp. (NYSE:IEX) 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 talk about potential slowdowns in manufacturing caused by continuing policy uncertainties. According to her, investor sentiments currently revolve around fears regarding economic expansion rather than inflationary pressures. During this discussion, she pointed out several softening metrics including trends from consumer confidence polls, retail sales reports, and service sector Purchasing Managers' Index numbers. Additionally, she highlighted that heightened political ambiguity can be seen through diminished inclinations towards acquiring significant durable equipment along with cutbacks in planned investments and expenditure activities. She further clarified that throughout the last twelve months, bond yields have fluctuated based mainly upon shifts in either inflation statistics or indications of economic performance—whether these were positive spikes or downturns. Her analysis suggests that the latest decline in yield rates stems predominantly from apprehensions related to an impending reduction in GDP growth instead of projections for decreased price levels. Consequently, this shift has prompted many traders to lean toward safer segments within their portfolios, indicating a general atmosphere of wariness among financial stakeholders.

The latest Purchasing Managers' Index (PMI) indicates a downturn in service activities, whereas manufacturing seems to be gaining momentum. This might lead to a possible harmonization between both industries. However, Sonders believes that the recent boost in manufacturing may face challenges because of continuing policy uncertainties. Consequently, numerous firms in the manufacturing industry are becoming more hesitant regarding prospective investments and expansions. Additionally, she noted that although talks were centered around substantial budget decreases initially aiming for $2 trillion, the real numbers fall far short of this mark. At present, observable cutbacks total under $10 billion. According to her, concentrating solely on these expenditure reductions would be too hasty since factors like tariff implementations, immigration rules, deportation strategies, and regulatory modifications collectively contribute to lowering economic forecasts and heightening anticipations of increased inflation rates. Furthermore, even though alterations in taxation laws are part of conversations currently, they seem more probable to influence end-of-year projections instead of immediate trends.

Our Methodology

Initially, we reviewed financial news articles along with data from the iShares U.S. Manufacturing ETF and the Vanguard Industrials ETF, alongside insider information from Insider Monkey’s Q4 2024 report on hedge fund holdings, to create a roster of smaller manufacturing company shares that were attracting investment attention from these firms. By our definition for this piece, small-cap equities refer to companies whose total value falls within the range of $10 billion to $20 billion, assessed up until April 25th. From this compiled list, we pinpointed the leading fifteen names and organized them based on how many different hedge funds had positions in each stock. When multiple securities shared identical levels of interest among investors, their relative size—specifically, their market capitalization—was utilized to establish the final ranking sequence.

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

An employee wearing a lab coat inspecting aPositive Displacement Pump.

IDEX Corp. (NYSE: IEX )

As of April 25, the Market Capitalization stands at $13.07 billion.

Number of Hedge Fund holders: 34

IDEX Corporation (NYSE:IEX) produces an array of items via three main divisions: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FSDP). The firm specializes in designing, manufacturing, and supplying positive displacement pumps, valves, small-volume provers, flow meters, injectors, as well as various fluid-handling pump components and complete systems.

In the fourth quarter of 2024, the company's HST division saw an 8% increase in organic orders, marking the largest gain across all divisions of IDEX. Throughout the entire year of 2024, HST experienced significant high single-digit growth in organic orders, primarily due to end-of-year bulk contracts in both the pneumatics and life sciences industries. A blanket order typically denotes a prolonged arrangement between a buyer and a supplier for purchasing certain products or services over a set timeframe, usually at a fixed cost.

In the fourth quarter, IDEX undertook various significant initiatives within the HST division, particularly focusing on the pharmaceuticals sector, international broadband satellite communication systems, and advancements in renewable energy solutions. Looking ahead to 2025, IDEX Corporation (NYSE: IEX) forecasts that the HST segment will lead with respect to organic expansion and expects this segment to reach towards the upper limit of IDEX’s projected growth rate between 1% and 3%.

The Weitz Large Cap Equity Fund commented on IDEX Corporation (NYSE:IEX) as follows in their Q3 2024 report. investor letter :

We kept augmenting the Fund’s holdings in Global Payments. IDEX Corporation (NYSE:IEX) during the quarter. Each of these stocks trades significantly below our estimated business values. They possess fundamental drivers that might boost their stock performance; however, the expected timeline for this growth has been slightly delayed. The difficulty lies in investor expectations for immediate outcomes, particularly within a bullish market environment. We have identified key benchmarks to monitor, which we believe will manifest over quarters instead of years. From our perspective, the substantial rewards associated with these investments justify the patience required."

Overall, IEX ranks 13th On our roster of small-cap manufacturing equities favored by hedge funds, we recognize the expansion prospects of IEX. However, our confidence leans towards AI stocks as they present significant opportunities for substantial gains with potentially quicker returns. Notably, one particular AI equity has surged this year despite many prominent AI shares dropping roughly 25% since January 2025. Should you seek an alternative AI investment to IEX—one trading below five times its earnings—consider exploring our detailed analysis outlined in our latest report. cheapest AI stock .

READ NEXT: 20 Top AI Stocks You Should Consider Buying 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 .

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