Is Pentair (PNR) 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 examine how Pentair (NYSE:PNR) 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 setbacks in manufacturing caused by persistent policy uncertainties. According to her observations, the prevailing mood among investors leans towards apprehensions regarding economic expansion rather than inflationary pressures. Sonders highlighted several deteriorating metrics including dips in consumer confidence levels, weaker retail sales numbers, and diminishing service sector performance indicated by their purchasing managers index (PMI). Additionally, she pointed out that heightened political ambiguity contributes to diminished inclinations toward acquiring significant machinery and equipment investments; this hesitation extends into decreased projections for overall business expenditure patterns. She further elaborated that throughout the last twelve months, financial markets witnessed fluctuations where bond yields were predominantly influenced either by shifts in price trends related to commodities like oil—often seen through an inflation lens—or adjustments linked with macroeconomic health conditions indicating slower or faster rates of national output growth. Currently, however, the dip observed recently in yield values stems from increased anxieties surrounding deceleration in GDP progression instead of optimistic forecasts predicting lower commodity prices leading to deflation fears easing off. Consequently, these sentiments have prompted many stakeholders across various industries to shift focus towards investing in more resilient industry segments, thereby reflecting widespread prudence amongst traders today.

Recently released Purchasing Managers' Index (PMI) numbers indicate a downturn in service activities, whereas manufacturing seems to be gaining momentum. This shift might lead to a possible harmonization between both industries. However, according to Sonders, the uptick in manufacturing may face threats from lingering uncertainties tied to various policies. Consequently, numerous firms within the manufacturing domain are becoming more hesitant regarding their prospective investment plans and expansions. Additionally, Sonders highlighted that although talks of substantial budget decreases initially aimed for around $2 trillion were circulating, the real savings fall far short of those projections; only minor cutbacks under $10 billion can currently be seen. In her view, concentrating solely on these expenditure reductions would be too hasty since factors such as tariff impositions, adjustments in immigration rules, deportations, and modifications in regulations collectively contribute to reducing economic forecasts and escalating anticipations of higher inflation rates. Furthermore, she mentioned that even though alterations in taxation laws are part of the discussion, they seem poised mainly to impact next fiscal-year predictions instead of influencing 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 trading insights provided by Insider Monkey for their fourth-quarter 2024 report on hedge fund activities. This research helped us create a roster of smaller-sized manufacturing companies currently attracting investments from hedge funds. By our definition here, these were firms whose stock values fell within the range of $10 billion to $20 billion at the close of business on April 25th. From this initial group, we narrowed down our focus to spotlight the leading fifteen names based on how many different hedge funds had invested in each one. If multiple securities shared similar investment counts, we settled disputes over ranking via comparison of respective market capitalizations.

Why do we focus on the stocks that hedge funds amass? 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, which has yielded a return of 373.4% since May 2014, exceeding its benchmark by 218 percentage points. s ee more details here ).

A factory employee wearing safety glasses and a helmet examining a water purification unit.

Pentair (NYSE: PNR )

Market Capitalization as of April 25: $14.81 billion

Number of Hedge Fund holders: 49

Pentair (NYSE: PNR) specializes in delivering water management solutions. Its Flow division focuses on designing, manufacturing, and selling fluid handling and pumping devices and systems. In the Water Solutions sector, they provide both commercial and residential water purification items and systems. Meanwhile, their Pool unit supplies equipment and accessories for both home and business swimming pools.

The Total Sales within the company’s Pool division rose by 7% compared to last year, totaling $384 million in Q1 2025. This growth was driven by higher prices, greater volumes, and the addition of G&F Manufacturing acquired at the end of Q4 2024. The return on sales for this sector grew by 2%, reaching 32.8%. Pentair expects sustained favorable trends in the Pool market moving forward.

In the second quarter of 2025, the firm anticipates an increase in pool-related revenues in the low double-digit range. For Pentair (NYSE:PNR), their overarching plan includes boosting sales growth incrementally via value-oriented pricing strategies along with implementing the 80/20 rule. This approach aims at fostering significant revenue increases from key products by concentrating efforts on top-tier clients. Furthermore, the corporation is aggressively undertaking restructuring projects designed to enhance profit margins throughout every division.

The Impax Global Environmental Markets Fund provided the following commentary on Pentair plc (NYSE:PNR) in their Q3 2024 report. investor letter :

“Pentair plc (NYSE: PNR) (operating in Water Distribution & Infrastructure within the U.S.) showed strong performance over the timeframe. Following the downturn experienced in Q2 due to pessimistic updates from different segments of its supply chain, the profits announced in July surpassed market expectations. Additionally, the company’s outlook, bolstered by enhancements in margins through internal efforts like boosting productivity, adjusting pricing strategies, and optimizing operational footprints, remained optimistic."

Overall, PNR ranks 3rd On our roster of small-cap manufacturing equities favored by hedge funds, we recognize the expansion prospects of PNR. However, our confidence leans towards the notion that artificial intelligence stocks present substantial opportunities for achieving significant financial gains over a compressed period. Notably, one such AI equity has surged since the start of 2025 even as many well-known AI shares have declined approximately 25%. Should you seek an alternative AI stock with greater upside potential compared to PNR yet trading below five times its earnings, explore our detailed analysis presented 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 Millionaires .

Disclosure: There are none to declare. This article was first published here. Insider Monkey .