Is Emcor Group (EME) A Small-Cap Construction and Materials Stock Hedge Funds Are Buying?

We recently published a list of the 15 Small-Cap Construction and Materials Stocks Hedge Funds Are Buying. In this article, we are going to take a look at where Emcor Group, Inc. (NYSE:EME) stands against other small-cap construction and materials stocks.

Saira Malik, Nuveen’s head of equities and fixed income, joined ‘Closing Bell’ on CNBC on March 26 to discuss her investment strategy in the middle of this uncertain market. She emphasized that two dominant themes are shaping the second quarter of this year: policy uncertainty and questions surrounding the pace of the economic slowdown. Malik noted that markets have shown a little optimism after a rebound from correction territory. This was driven by investor expectations of watered-down tariffs and the return of the term ‘transitory’ regarding inflation effects from tariffs. However, she highlighted that the economy continues to slow. Given this, Malik prefers defensive market sectors, particularly infrastructure. She also identified municipal bonds as a favored fixed-income category.

These appeal to local investors who seek stable income streams in the middle of this economic uncertainty. Malik also acknowledged the risk that continued negative sentiment about consumer weakness could become a self-fulfilling prophecy. She pointed out that the economy’s recent strength has been driven by consumer spending and employment, with about half of payroll growth since 2019 coming from government jobs. The recent data on consumer spending, retail sales, and confidence have been weak, but consumers often express pessimism without reducing spending proportionally. Despite this, she stressed that the economy is slowing and warned that ongoing tariff uncertainty could cause a sharper economic downturn. However, she also mentioned potential upside from forthcoming tax cuts and deregulation, which could provide economic support. Malik explained that the market’s recent optimism comes from increasing clarity about tariff implementation and targets.

Our Methodology

We first sifted through financial media reports, ETFs, and Insider Monkey’s Q4 2024 hedge funds database reports to compile a list of the small-cap construction and materials stocks hedge funds are buying. For this article, we define small-cap stocks as those that trade between $10 billion and $30 billion, as of April 28. 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.

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).

Emcor Group, Inc. (NYSE:EME)

Market Capitalization as of April 28: $18.53 billion

Number of Hedge Fund Holders: 55

Emcor Group Inc. (NYSE:EME) provides electrical and mechanical construction in the US and the UK. It offers design, integration, installation, and maintenance services for power transmission, distribution, and generation systems. It also provides site-based operations & maintenance, facility management & maintenance, installation & support for building systems, and other infrastructure & building projects.

Emcor generates 97% of its sales in the US, which provides it with a natural hedge against global trade disruptions, tariffs, and commodity cost volatility. The US Mechanical Construction segment at Emcor Group, Inc. (NYSE:EME) made revenues of $1.66 billion in Q4 2024. This was up 12.8% year-over-year and was driven by the demand in the network and communications sector (especially data centers), high-tech manufacturing, and healthcare.

The company is confident in the underlying demand drivers of the manufacturing and industrial sectors, which is supported by a 7% year-over-year increase in manufacturing RPOs (Remaining Performance Obligations). Emcor is now capitalizing on growing markets due to its expertise in complex mechanical and piping systems, VDC (Virtual Design and Construction), and prefabrication capabilities.

TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding EMCOR Group, Inc. (NYSE:EME) in its Q3 2024 investor letter:

“Leaving the strategy this quarter was EMCOR Group, Inc. (NYSE:EME), which provides construction and operational services for mechanical and electrical systems to a broad range of commercial, industrial, utility, and institutional customers. It had been one of the steadiest gainers and contributors this year, though the stock’s market capitalization grew past the upper limit for the strategy.”

Overall, EME ranks 2nd on our list of the small-cap construction and materials stocks hedge funds are buying. While we acknowledge the growth potential of EME, 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 EME but that trades at less than 5 times its earnings, check out our report about this 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.