In this article, we will take a look at the 12 best electrical equipment stocks to buy now. To see more such companies, go directly to 5Best Electrical Equipment Stocks to Buy Now.
In its report on the industrial equipment industry published back in April 2023, Baird said that the sector was facing several challenges amid rising inflation and interest rates. This along with other factors have caused moderation in valuations of industrial equipment companies. Baird said that public market valuations are off the peak 2023 levels, “but many are now more in-line with long-term, average levels." The report also said that contrary to the record M&A activity in the industry seen in 2021, 2022 was a slow year for the industry amid geopolitical and economic headwinds. However, Baird said that M&A activity could rebound later in 2023.
The electrical equipment sector comes under the broader umbrella of the manufacturing industry, which has strong growth prospects in the coming years. As countries strive to increase manufacturing to boost innovation and exports, the demand of electrical equipment will increase. The manufacturing industry is one of the few areas of the economy which drive innovation and progress. A report by Brookings quotes a 2008 survey from National Science Foundation’s Business R&D and Innovation, which said that 22 percent of manufacturing companies but only 8 percent of non-manufacturing companies introduced a new or significantly improved good or service between 2006 and 2008. The report said that while the manufacturing sector accounts for about 11% of GDP, manufacturing companies are big spenders on R&D.
“Manufacturers account for 68 percent of U.S. domestic company R&D spending. The manufacturing industries that each account for at least 5 percent of the nation’s domestic company R&D are pharmaceuticals (which alone accounts for 18 percent), transportation equipment, communications equipment, and semiconductors. The only non-manufacturing industries in which companies perform this much R&D domestically are software and professional/scientific/technical services. A similar picture emerges when examining R&D intensity (R&D spending as a percentage of sales), a measure of R&D effort that standardizes for the size of each industry. Domestic company R&D spending is 3.6 percent of domestic manufacturing sales, compared to 2.4 percent of domestic nonmanufacturing sales. Among manufacturing industries, R&D intensity is highest in the computer and electronics industries and pharmaceuticals. It also exceeds the non-manufacturing average in machinery, aerospace, motor vehicles/trailers/parts, and electrical equipment/appliances/components but is below the non-manufacturing average in all other manufacturing industries.”
But despite this R&D spending, there is plenty of space for innovation like automation and robotics in the industry. Data from ABI Research says that on a scale of 1 to 5, most manufacturers are at level 2 to level 3 when it comes to digital transformation. Companies in the industry are just getting started with automation, Cloud, robotics, and other advanced technologies. This digitization will create further demand and opportunities for the electrical equipment companies operating in the space.
ABI Research also shares some interesting insights about the applications of robotics in the manufacturing industry. The manufacturing sector has been suffering from labor shortage for a long time. The industry is now starting to turn to robotics to solve the labor shortage problem. ABI Research said the industry is using Collaborative Robots (cobots), Automated Guided Vehicles (AGVs), and Autonomous Mobile Robots (AMRs). ABI expects that manufacturers will increase their investments in robotics as it sees an 11% growth in robot product shipments and 8% growth in robot product revenue in 2023. All of this will bode for electrical equipment companies.
As investors anticipate to enter the bull market era and analysts are growing hopeful about the global economic activity, the electrical equipment market is expected to rebound and thrive in the coming years on the back of the solid and upbeat state of the manufacturing industry. In a survey conducted by The National Association of Manufacturers for the first quarter of 2023 from Feb. 21 to March 7, 2023, 74.7% of respondents felt either somewhat or very positive in their company outlook. This was an increase from 68.9% in the fourth quarter. In addition, the survey said that just over 49% of the respondents in the manufacturing industry believed that the U.S. economy would experience a recession in 2023, significantly down from 62.4% expecting a recession in the previous survey.
Increasing investments from the US government on the country’s infrastructure will also help the electrical equipment industry. A report said that electrical contractors will directly benefit from the Infrastructure Investment and Jobs Act2 (IIJA). The report also said that 75% of all electrical work results from “projects for institutional and commercial clients.”
Best Electrical Equipment Stocks to Buy Now
Our Methodology
For this article, we first used stock screeners to identify US companies operating in the electrical equipment industry. We then picked 12 of these companies with the highest number of hedge fund investors. This way, the stocks mentioned in this article are the best electrical equipment stocks to buy according to elite hedge funds.
Pennsylvania-based EnerSys (NYSE:ENS) makes reserve power and motive power batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure systems.
EnerSys (NYSE:ENS) jumped in June after the company said it entered into a non-binding memorandum of understanding with French battery maker Verkor SAS to explore the development of a lithium battery gigafactory in the U.S.
As of the end of the March quarter, 23 hedge funds tracked by Insider Monkey were long EnerSys (NYSE:ENS). The biggest stakeholder of EnerSys (NYSE:ENS) was Matt Sirovich and Jeremy Mindich’s Scopia Capital which owns an $85 million stake in the company.
Vulcan Value Partners made the following comment about EnerSys (NYSE:ENS) in its Q4 2022 investor letter:
“EnerSys (NYSE:ENS) is a global leader in stored energy solutions for industrial applications. It supplies motive power batteries for trucks and forklifts, specialty batteries for satellites and military equipment, battery chargers, power converters and distributors, and outdoor equipment enclosures, amongst many other products and systems. Over the past three years, the business faced COVID-19 lockdowns, inflationary cost increases, and restricted access to the critical product components needed for its more complex, higher return products. On its most recent quarterly earnings call, management was confident the business had finally worked past many of these issues and expressed optimism that costs were beginning to level off, supply chain issues were easing, and EnerSys could resume converting its backlog into revenue. The stock price responded favorably to the quarterly results and management’s comments, and we continue to see plenty of opportunity for sequential improvement ahead.”
Encore Wire Corporation (NASDAQ:WIRE) offers cable and wire solutions. Encore Wire Corporation (NASDAQ:WIRE) has gained about 33% year to date through July 10. As of the end of the first quarter of 2023, 13 hedge funds tracked by Insider Monkey had stakes in Encore Wire Corporation (NASDAQ:WIRE).
Encore Wire Corporation (NASDAQ:WIRE) in May declared per-share quarterly dividend of $0.02 per share.
California-based Bloom Energy Corporation (NYSE:BE) makes solid oxide fuel cells that produce electricity on-site.
Earlier this month, RBC Capital started covering Bloom Energy Corporation (NYSE:BE) with an Outperform rating and a $24 price target. RBC Capital thinks that Bloom Energy is "positioned for robust growth and improving profitability through the end of the decade."
Insider Monkey’s database of 943 hedge funds shows that 29 funds had stakes in Bloom Energy Corporation (NYSE:BE) as of the end of the first quarter.
ClearBridge Investments made the following comment about Bloom Energy Corporation (NYSE:BE) in its Q3 2022 investor letter:
“We were active in repositioning the portfolio in the quarter as market crosswinds opened idiosyncratic opportunities, adding two new industrials companies. Bloom Energy Corporation (NYSE:BE) is an electrical equipment company that makes solid-oxide fuel cell systems for on-site power generation, serving a variety of industries. Its fuel cells convert natural gas, biogas or hydrogen into baseload (non-intermittent) electricity without combustion, so there is low or no carbon emission. We expect significant upside through its ability to support the growing hydrogen economy, with a large opportunity for this in South Korea and meaningful policy support in the U.S. via the IRA, while other markets include biogas, carbon capture and marine transportation. Its natural gas energy server business is growing in the U.S. amid higher grid reliability concerns.”
Of the 943 hedge funds in Insider Monkey’s database, 31 hedge funds reported owning stakes in Atkore International Group Inc. (NYSE:ATKR) as of the end of the March quarter. The biggest stakeholder of Atkore International Group Inc. (NYSE:ATKR) was Gates Capital Management of Jeffrey Gates which owns a $127 million stake in the company.
In May, Atkore International Group Inc. (NYSE:ATKR) posted second quarter results. Adjusted EPS in the period came in at $4.87, beating estimates by $0.60.
HL Global Small Companies Equity Strategy made the following comment about Atkore Inc. (NYSE:ATKR) in its first quarter 2023 investor letter:
“By region, the US posted the biggest outperformance. Atkore Inc. (NYSE:ATKR) reported higher demand for electrical conduit, particularly for non-residential uses such as data centers and chip-fabrication plants.”
Connecticut-based Hubbell Incorporated (NYSE:HUBB) makes electrical and electronic products for non-residential and residential construction, industrial, and utility applications. As of the end of the first quarter of 2023, 32 hedge funds in Insider Monkey’s database reported owning stakes in Hubbell Incorporated (NYSE:HUBB). The most notable hedge fund stakeholder of Hubbell Incorporated (NYSE:HUBB) was Ian Simm’s Impax Asset Management which owns a $235 million stake in the company.
In the first quarter, Hubbell Incorporated (NYSE:HUBB)’s adjusted EPS came in at $3.61 beating estimates by $1.12. Revenue in the quarter jumped 11.2% year over year to $1.29 billion, surpassing estimates by $40 million.
TimesSquare Capital made the following comment about Hubbell Incorporated (NYSE:HUBB) in its Q3 2022 investor letter:
“Hubbell Incorporated (NYSE:HUBB), a designer and manufacturer of electronic products, climbed 26%. Ongoing capital expenditures by its electrical utility customers resulted in sizable beats to revenue and earnings projections. A substantial backlog led management to raise forward guidance.”
Atlanta, Georgia-based lighting solutions company Acuity Brands, Inc. (NYSE:AYI)’s shares are up about 3.7% over the past 12 months through July 10.
A total of 34 hedge funds were long Acuity Brands, Inc. (NYSE:AYI) as of the end of the first quarter, according to Insider Monkey’s database of 943 hedge funds.
Wedgewood Partners made the following comment about Acuity Brands, Inc. (NYSE:AYI) in its Q3 2022 investor letter:
“Acuity Brands, Inc. (NYSE:AYI) contributed to portfolio performance as the Company continued to generate strong revenue growth while protecting margins in the face of a particularly difficult inflationary environment. The Company’s fiscal fourth quarter results (released in early October) reflected +12% revenue growth with over +15% adjusted operating margins that are near all-time highs from a year ago. Acuity is managing inflationary pressure by constantly re-engineering their lighting and control products while also enacting more than a half-dozen price increases over the past 2 years. The Company’s backlog continues to build as commercial office, education and industrial facilities owners invest in much needed renovations. The secular move toward more energy-efficient commercial lighting solutions is a long-term driver for Acuity products. For example, California recently banned the sale of compact and linear fluorescent lamps. Although Acuity does not sell lightbulbs, it stands to benefit from future demand for luminaires and lighting controls for LED units that will inevitably replace these fixtures.”
UK-based nVent Electric plc (NYSE:NVT) sells electrical and fastening solutions, electric heat-tracing solutions and heat-management systems. nVent Electric plc (NYSE:NVT) ranks 6th in our list of the best electrical equipment stocks to buy according to hedge funds. The company recently bought ECM Investors, the parent company of ECM Industries.
nVent Electric plc (NYSE:NVT) in April posted first quarter results. Adjusted EPS in the period came in at $0.67, meeting estimates. Revenue in the quarter jumped 6.6% year over year to $741 million. nVent Electric plc (NYSE:NVT) also upped its full year sales and EPS guidance.
Insider Monkey’s database of 943 hedge funds shows that 39 hedge funds had stakes in nVent Electric plc (NYSE:NVT) as of the end of the first quarter. The biggest stakeholder of nVent Electric plc (NYSE:NVT) was Ariel Investments of John W. Rogers which had a $143 million stake in the company.
Here is what Fiduciary Management Small Cap Equity has to say about nVent Electric plc (NYSE:NVT) in its Q1 2022 investor letter:
“nVent is a global provider of electrical connection and protection solutions. It was spun out of Pentair in 2018. The company is headquartered in Minneapolis, MN, although it’s incorporated in Ireland, and reports three segments: Enclosures (51% of sales and 40% of EBITA3), Electrical & Fastening Solutions (27% of sales and 36% of EBITA), and Thermal Management (22% of sales and 24% of EBITA). By geography, sales are split 63% U.S. and Canada, 23% Developed Europe, 11% Developing, and 3% Other Developed. By vertical, sales are split 43% Industrial, 28% Commercial & Residential, 21% Infrastructure, and 8% Energy…” (Click here to see the full text)