Through the end of May, the industrial sector has quietly emerged as one of the top performers in the market. The Industrial Select Sector SPDR ETF (XLI) currently leads all major sector ETFs in year-to-date performance – a sign of investor interest in companies that help build the backbone of the global economy.
But there’s more to the story than performance alone. Industrial stocks represent a diverse group of companies that build, move, manufacture, and maintain much of the world’s economic infrastructure. And with reshoring trends, infrastructure spending, and automation driving demand, the sector is seeing strength across multiple segments.
Why Industrials Matter
The industrial sector plays a vital role in enabling economic growth, both in the U.S. and globally. It spans a wide range of industries, including:
- Heavy equipment (e.g., Caterpillar (CAT))
- Aerospace and defense (e.g., Boeing (BA))
- Industrial conglomerates (e.g., General Electric (GE))
- Automation and advanced manufacturing (e.g., Honeywell (HON))
- Logistics and transportation (e.g., Union Pacific (UNP))
These are not niche players – they are some of the most well-known and widely held companies in the world. And they’re critical to everything from infrastructure development and supply chain logistics to residential housing and renewable energy.
The XLI ETF offers a simple and diversified way for investors to gain exposure to this essential segment of the economy, bundling these large industrial names with smaller, high-growth firms across the sector.
Validea’s Top Industrial Stocks
At Validea, we score each stock using models inspired by legendary investors like Warren Buffett, Benjamin Graham, and Peter Lynch. These ‘guru strategies’ evaluate companies based on value, growth, profitability, momentum, and shareholder friendliness.
Below are five of the top-rated industrial stocks within the XLI ETF, based on our multi-model scoring system:
| Ticker | Company | Top Strategy Scores | Classification |
|---|---|---|---|
| BCC | Boise Cascade | Graham (100%) | Deep Value |
| KMTUY | Komatsu Ltd. (ADR) | O’Shaughnessy (100%), Lynch (93%) | Growth + Value |
| GRBK | Green Brick Partners | O’Shaughnessy (100%), Carlisle (94%) | Small-Cap Growth |
| TT | Trane Technologies | Momentum (89%), Zweig (85%) | Momentum + Growth |
| PHM | PulteGroup | Acquirer’s Multiple (94%), Lynch (93%) | Growth + Value |
These companies exhibit a combination of low valuation multiples, strong earnings growth, and high shareholder return metrics – traits that have historically been associated with long-term outperformance.
The Bottom Line
The industrial sector may not always be in the spotlight, but in 2025 it’s earning investor attention for good reason. With strong performance, solid fundamentals, and broad economic relevance, it’s making a compelling case as the best-performing sector of the year.
Whether through the XLI ETF or through carefully selected individual stocks, exposure to this sector offers investors a balanced blend of value, growth, and economic resilience.
