We recently published a list of the 15 Small-Cap Manufacturing Stocks Hedge Funds Are Buying. In this article, we are going to take a look at where Masco Corp. (NYSE:MAS) stands against other small-cap manufacturing stocks.

Earlier on February 26, Liz Ann Sonders, Charles Schwab chief investment strategist, joined CNBC’s ‘Squawk on the Street’ to discuss how manufacturing could stall due to the ongoing policy uncertainty.  She thinks that the current market sentiment is focused on concerns about economic growth more than on inflation. Sonders noted a list of weakening indicators, such as consumer sentiment surveys, retail sales, and services PMI figures. She emphasized that rising policy uncertainty also manifests in reduced intentions to purchase large capital goods and causes a pullback in capital expenditures and spending plans. Sonders explained that, over the past year, market yields have alternated between responding primarily to inflation data and growth signals, both during periods of increases and declines. She thinks that the recent downward movement in yields is driven by worries about slowing growth more than by expectations of declining inflation. This has led investors to favor more defensive sectors within the market, which reflects a broader sense of caution.

Recent PMI data has shown services activity starting to decline, but manufacturing has picked up. This could result in a potential positive convergence between the two sectors. But Sonders thinks that this improvement in manufacturing could be at risk due to the policy-related uncertainty still ongoing. Therefore, many companies within the manufacturing sector are now increasingly cautious about future investments and expansion. Sonders also pointed out that while there have been discussions about significant deficit reductions, originally targeting $2 trillion, the actual figures are much smaller. The current visible cuts amount to less than $10 billion. She argued that it is premature to focus on these spending cuts alone, as the effects of tariffs, immigration, and deportation policies, and regulatory changes are collectively putting downward pressure on growth estimates and upward pressure on inflation expectations. She added that while tax policy changes are being discussed, these are more likely to affect the year-end outlook rather than the near-term trajectory.

Our Methodology

We first sifted through financial media reports, iShares U.S. Manufacturing ETF, Vanguard Industrials ETF, and Insider Monkey’s Q4 2024 hedge funds database reports to compile a list of the small-cap manufacturing stocks hedge funds are buying. For this article, we define small-cap stocks as those that trade between $10 billion and $20 billion, as of April 25. We then selected the top 15 stocks and ranked them in ascending order of the number of hedge funds that have stakes in them. In cases where an equal number of hedge funds held two or more stocks, we used the market cap as a tiebreaker.

Story Continues

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).Is Masco Corp. (NYSE:MAS) a Small-Cap Manufacturing Stock Hedge Funds Are Buying?

A Home improvement store aisle with multiple types of building products on display.

Masco Corp. (NYSE:MAS)

Market Capitalization as of April 25: $12.75 billion

Number of Hedge Fund Holders: 43

Masco Corp. (NYSE:MAS) provides home improvement and building products in North America, Europe, and internationally. The company’s Plumbing Products segment manufactures products like faucets, showerheads, shower drains, and water filtration systems. Its Decorative Architectural Products segment offers paints, primers, specialty coatings, stains, and waterproofing products.

In Q1 2025, the company’s Plumbing segment had its sales increase by ~1%. Within this segment, North American plumbing sales also grew by ~1% due to higher volumes in the spa and sauna business and favorable pricing, which partially offset lower volumes in the retail channel. This performance was achieved despite facing cost increases due to newly enacted tariffs, particularly on imports from China.

However, the Plumbing segment is expected to be significantly impacted by the new tariffs. Masco Corp. (NYSE:MAS) estimates an in-year cost of ~$400 million in 2025 due to these tariffs, before any mitigation efforts. The annualized impact of these incremental tariffs is estimated to be ~$625 million out of a total annualized tariff impact of $675 million for the entire company. However, Masco estimates that it can offset ~$200 to $250 million, or roughly 50% to 65%, of these tariff costs during 2025.

Overall, MAS ranks 5th on our list of the small-cap manufacturing stocks hedge funds are buying. While we acknowledge the growth potential of MAS, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MAS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.

View Comments