Is WWD Stock on Hedge Funds' Buy List as a Small-Cap Manufacturing Gem?

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 Woodward Inc. (NASDAQ:WWD) 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 observations, present market sentiments are more preoccupied with apprehensions regarding economic expansion rather than inflationary pressures. During this discussion, she pointed out several deteriorating metrics like consumer confidence polls, retail sales numbers, and service sector Purchasing Managers Indexes. Additionally, she highlighted that heightened policy ambiguities can result in diminished inclinations towards acquiring significant capital equipment, leading businesses to scale back their investments and expenditure strategies. Furthermore, Sonders mentioned that throughout the last twelve months, bond yields have fluctuated based predominantly upon shifts in either inflation statistics or signs of economic progress—whether these were upward trends or downturns. Recently though, the decline seen in yield rates seems to stem from anxieties concerning an impending slowdown in growth instead of anticipations for diminishing price levels. Consequently, this shift has prompted many investors to gravitate toward more resilient industry segments within the stock markets, indicating a general atmosphere of wariness among them.

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 progress in manufacturing may face threats because of continuing policy uncertainties. Consequently, numerous businesses in the manufacturing domain are becoming more hesitant regarding prospective investments and expansions. Additionally, Sonders highlighted that although talks initially aimed for substantial deficit decreases totaling around $2 trillion, the realized savings fall short significantly, with observable reductions coming to under $10 billion. In her view, concentrating solely on these budget cuts would be hasty since factors like tariff implementations, immigration rules, deportation measures, and regulatory adjustments collectively contribute to lowering economic growth forecasts and increasing anticipations of higher inflation rates. Moreover, she mentioned that even though modifications in taxation laws are part of the discussion, they're expected to impact only the end-of-year projections instead of influencing immediate trends.

Our Methodology

Initially, we examined 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 activities, to create a roster of smaller-scale manufacturing equities that were attracting investments from these funds. Here, "small-cap" refers specifically to companies whose total equity value falls within the range of $10 billion to $20 billion, as noted up until April 25th. From this compilation, we identified the leading fifteen stocks and organized them based on how many different hedge funds had invested in each one, starting from the least popular among investors upwards. If multiple firms shared similar levels of interest, their ranking was decided using their respective market capitalization figures for differentiation.

Why do we focus on the stocks that hedge funds amass? It's straightforward: our analysis indicates that mimicking the leading stock choices from premier hedge funds allows us to exceed market performance. Each quarter, our monthly bulletin chooses 14 small-cap and large-cap equities, yielding a return of 373.4% since May 2014, surpassing its benchmark by 218 percentage points. s ee more details here ).

A detailed view of a fuel pump being handled by a robotic arm, representing the firm's tech-powered industrial services.

Woodward Inc. (NASDAQ: WWD )

Market Capitalization as of April 25: $10.8 billion

Number of Hedge Fund Investors: 35

Woodward Inc. (NASDAQ: WWD) specializes in designing, producing, and maintaining control solutions for both aerospace and industrial sectors. The company divides its operations into two main divisions: Aerospace and Industrial. Their range of products can be found in various applications including commercial and personal airplanes and helicopters, along with military planes and helicopters, precision-guided weaponry, and additional defense equipment.

Woodward's Aerospace division reported a revenue of $494 million for the first quarter of 2025, marking a 7% increase compared to the same period last year. Although commercial original equipment manufacturer (OEM) sales dropped by 10% because of halted shipments of specific products to Boeing, this decline was balanced out by gains elsewhere. Specifically, commercial aftermarket sales jumped by 19%, defense OEM sales rose by 21%, and defense aftermarket sales expanded by 8%.

In the first quarter, The Aerospace sector reported earnings totaling $95 million, accounting for 19.2% of total segment sales. Woodward Inc. (NASDAQ: WWD) currently faces increasing orders from both airframe and engine original equipment manufacturers (OEMs), signaling potential expansion within the aerospace industry. To accommodate this growing demand, Woodward plans to hire more direct labor workers and work closely with their supplier partners to tackle persistent issues within the supply chain.

Overall, WWD ranks 12th On our roster of small-cap manufacturing equities favored by hedge funds, we recognize the expansion prospects of WWD. However, our confidence leans towards the notion that artificial intelligence stocks present substantial opportunities for generating significant profits over a condensed timeframe. Among these, one particular AI equity has surged since early 2025, contrasting with many well-known AI shares which have declined roughly 25% during this period. Should you seek an alternative AI investment to WWD—one offering greater upside yet trading below five times its earnings—please refer to our detailed analysis presented in the subsequent document. 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: No conflicts of interest. This article was initially published here. Insider Monkey .