Like the materials sector, industrials have been a dog for investors this year. Industrial companies in the S&P 500 were down 2.9% in 2011, according to S&P Capital IQ, the third worst sector performer of the year. However, since the end of the third quarter, industrial stocks have been roaring back. In the final quarter of 2011, the sector was up 15.7%, second only to the 17.6% gain in energy. That momentum has carried into 2012, with the sector up 8.4% through Feb. 15.
It remains to be seen whether those industrial bets pay off, but for now analysts are looking positively on the sector. According to FactSet Research, industrial companies in the S&P 500 should see earnings grow 10% this year, the fourth highest growth rate for any sector.
One reason that many hedge funds saw increases in exposure to industrials was because of purchases of M&A target
. The company, which will be acquired by
, found buyers in Eton Park Capital, and Farallon Capital. Lone Pine Capital, meanwhile, dumped its entire stake in Goodrich and United Tech.
Among other notable buys, Carl Icahn picked up a few industrial stocks, buying shares of
. John Thaler's JAT Capital took new positions in
Lee Ainslie's Maverick Capital
bought up shares of
Elsewhere, Bruce Kovner's Caxton Associates was a big buyer of industrial stocks, picking up merger mates
along with shares of
Illinois Tool Works
, among others.
Bill Ackman's Pershing Square
also increased its exposure to industrials, but that's after Ackman built up a massive position in railway
. Ackman now owns 14.2% of shares outstanding as he has gone activist on Canadian Pacific's management team.
On the other hand, David Tepper took an axe to Appaloosa's airline holdings, reducing positions in
while completely liquidating his stake in
Delta Air Lines
>>To see these stocks in action, visit the
Industrial Stocks Bought and Sold by Hedge Funds
portfolio on Stockpickr.