Manufacturing: The Next Big Thing for Mutual Funds

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Mutual funds are increasingly looking to manufacturing stocks as a way to generate alpha. After years of being overlooked by fund managers, manufacturing stocks are now seen as a potential source of growth and diversification.

There are a few reasons why manufacturing stocks are becoming more attractive to mutual funds. First, the global manufacturing sector is expected to grow at a faster pace than the overall economy in the coming years. This is due to a number of factors, including rising demand from emerging markets, the need for infrastructure investment in developed countries, and the growth of the internet of things (IoT).

Second, manufacturing stocks are becoming more attractively valued. The price-to-earnings (P/E) ratio of the MSCI World Manufacturing Index is now below the P/E ratio of the MSCI World Index as a whole. This means that manufacturing stocks are now relatively cheap compared to other sectors of the stock market.

Third, manufacturing stocks offer a good mix of growth and value. Many manufacturing companies are still in the early stages of their growth cycle, which means that they have the potential to generate strong earnings growth in the coming years. At the same time, many manufacturing stocks are trading at relatively low valuations, which makes them attractive to value investors.

As a result of these factors, mutual funds are increasingly adding manufacturing stocks to their portfolios. In fact, according to a recent survey by Morningstar, the percentage of mutual funds that own manufacturing stocks has increased from 15% in 2015 to 20% in 2023.

Here are some of the top midcap manufacturing stocks that are being picked by mutual funds:

  • Bharat Forge: Bharat Forge is a leading manufacturer of forgings and components for the automotive and industrial sectors. The company has a strong track record of growth and profitability, and it is well-positioned to benefit from the growth of the global manufacturing sector.
  • JSW Steel: JSW Steel is one of India’s largest steel producers. The company has a strong balance sheet and a low debt-to-equity ratio. JSW Steel is also investing heavily in new capacity, which will help it to meet the growing demand for steel in India and abroad.
  • Arvind Limited: Arvind Limited is a leading textile manufacturer. The company has a strong brand portfolio and a wide distribution network. Arvind Limited is well-positioned to benefit from the growth of the Indian retail sector and the increasing demand for branded apparel.
  • Lupin Limited: Lupin Limited is one of India’s largest pharmaceutical companies. The company has a strong product portfolio and a global reach. Lupin Limited is well-positioned to benefit from the growing demand for generic drugs in India and abroad.
  • Motherson Sumi Systems: Motherson Sumi Systems is a leading automotive supplier. The company has a strong global presence and a wide range of products. Motherson Sumi Systems is well-positioned to benefit from the growth of the global automotive industry.

These are just a few of the many manufacturing stocks that are being picked by mutual funds. As the global manufacturing sector continues to grow, it is likely that mutual funds will continue to add more manufacturing stocks to their portfolios.


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