Is Snap-On Inc. (SNA) the Next Big Pick for Hedge Funds in Small-Cap Manufacturing Stocks?

We recently released a list of the 15 Tiny-Market-Manufacturing Stocks That Hedge Funds Are Snatching Up In this piece, we will examine how Snap-On Inc. (NYSE:SNA) 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 analyze how manufacturing might be hindered because of continuing policy uncertainties. According to her, present market sentiments lean towards apprehensions regarding economic expansion rather than focusing on inflationary pressures. During this discussion, she highlighted several softening metrics like customer confidence polls, merchandise sales, and service sector Purchasing Managers Index readings. Additionally, Sonders pointed out that heightened policy unpredictability can lead businesses to postpone major investments in equipment and result in cutbacks for planned capital expenditure and spending activities. She further elaborated that throughout the last twelve months, bond yields have fluctuated based mainly on shifts in either inflation statistics or indications of economic performance—whether these were upward trends or downturns. Currently, Sonders believes that the decline in yield levels recently observed stems from fears concerning an impending slowdown in economic activity instead of anticipations of diminishing price hikes. Consequently, this shift has prompted investors to gravitate toward safer asset classes within their portfolios, signaling a general atmosphere of wariness across financial markets.

The latest Purchasing Managers' Index (PMI) indicates 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, this resurgence in manufacturing may face challenges because of persistent policy uncertainties. Consequently, numerous firms in the manufacturing domain are becoming more hesitant regarding their future investment plans and expansions. Additionally, Sonders highlighted that although talks of substantial fiscal deficits aimed at reducing around $2 trillion were circulating, the real reduction numbers appear far lower. At present, only minor cutbacks below $10 billion can actually be seen. She believes it’s too early to concentrate solely on these expenditure decreases since factors such as tariff impacts, immigration rules, deportation practices, and regulatory modifications cumulatively exert negative pressures on economic growth forecasts and push inflationary predictions higher. Moreover, she noted that even though alterations in taxation policies are under consideration, they will probably influence end-of-year projections instead of short-term 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 from Insider Monkey for their Q4 2024 report on hedge fund activities. This research helped us assemble a roster of smaller-sized manufacturing equities that attracted significant interest among hedge funds during this period. By our definition here, these were companies whose stock values ranged between $10 billion and $20 billion as recorded up until April 25th. Next, out of all identified names, we picked the leading fifteen firms based on how many different hedge funds had invested in each one. When multiple securities shared identical counts of stakeholders, preference was given to those having higher market capitalizations at that time. The final ranking thus reflects both investor enthusiasm measured by stakeholder count and relative company size within the sector.

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 chooses 14 small-cap and large-cap stocks, delivering an impressive return of 373.4% since May 2014, which significantly outperforms its benchmark by 218 percentage points. s ee more details here ).

A workshop brimming with tools and materials, highlighting the variety of items for sale.

Snap-On Inc. (NYSE: SNA )

As of April 25, the Market Capitalization stands at $16.15 billion.

Number of Hedge Fund Owners: 32

Snap-On Inc. (NYSE:SNA) produces and distributes tools, equipment, diagnostic devices, as well as repair information and system solutions. The company conducts business via four main divisions: Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services. Its customer base spans multiple sectors including aviation and aerospace up to infrastructure development projects.

In the first quarter of 2025, the firm reported an aggregate income of $1.14 billion. Despite witnessing approximately a 3.5% drop compared to the same period last year, Snap-on’s Repair Systems & Information division experienced a sales uptick of around 3.7%. This growth can be attributed primarily to their range of software-driven products. Importantly, within this sector, software revenues expanded more rapidly than the general rise in RSNI earnings.

This division consistently performs well, making RSNI a key driver of growth and profitability for Snap-On Inc. (NYSE:SNA). The effectiveness of RSNI’s offerings has been improving thanks to their database capabilities, with artificial intelligence playing an essential role here too. This technology streamlines the process of converting repair-related natural language from technicians directly into useful data within the system.

Ariel Focus Fund made the following comments about Snap-on Incorporated (NYSE:SNA) in their Q4 2024 report. investor letter :

Snap-on Incorporated (NYSE: SNA), an innovative tool manufacturer, led the pack during this period thanks to its adept handling of the escalating intricacies within the automotive repair sector. Despite facing tough economic conditions, SNA shifted focus toward developing cost-effective handheld tools, which boosted their sequential quarter-over-quarter sales growth and expanded profit margins. This achievement underscores SNA's distinctive market approach, especially as they adapt swiftly based on immediate customer input and continuously develop specialized offerings for original equipment manufacturers. From our perspective, the future looks promising for the auto-repair business because cars are getting older and repairs require increasingly advanced technical skills.

Overall, SNA ranks 14th On our roster of small-cap manufacturing equities favored by hedge funds, we recognize the expansion prospects of SNA. Nonetheless, our confidence leans toward AI stocks as they present significant opportunities for substantial gains over a condensed timeframe. Among these, one particular AI equity has surged year-to-date even though many well-known AI names have declined approximately 25%. Should you seek an AI stock with greater upside potential compared to SNA yet trading below five times its earnings, explore our detailed analysis available 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 none to declare. This article was initially published here. Insider Monkey .

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