Badger Meter Gets an Upgrade—2 Stocks That Could Follow

April 04, 2025 at 08:00 AM EDT

Water meter — Photo

Most investors will see Wall Street analysts take a new view on the stock and move past it, only weighing how much upside there could be in that specific pick. However, the true benefit of following analyst ratings and valuation targets is that investors can reverse engineer some of these views into a broader industry or peer group sentiment, which then connects the dots to what the economy might take on.

With President Trump having announced the April 2 trade tariffs—dubbed “Liberation Day” by some—the move could significantly impact the U.S. industrial sector. This is where the biggest opportunity may lie in the coming months and why analysts at the Royal Bank of Canada chose to issue their latest upgrade in this space.

As of March 2025, these analysts saw the tariff theme potentially being a good thing for shares of Badger Meter Inc. (NYSE: BMI), and for a good reason. While there is a justified bullish case in that name, the true turn of events (being more domestic production) could make other names like 3M (NYSE: MMM) and Caterpillar Inc. (NYSE: CAT) potential buy targets as well in the coming months following the tariff implementations.

The Case for Badger Meter Stock

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As these companies react to tariffs by boosting their manufacturing and production activity within the United States, there is likely to be a new wave of infrastructure spending on behalf of the United States government. This means new factories, buildings, and even offices, which is where Badger Meter comes into play.

This belief also recently passed the thesis stage, and investors can notice up to $485 million worth of institutional capital making its way into the company over the past quarter alone. This vote of confidence might be only the start of a new path higher, and these analysts know that’s the likely case.

By placing a price target of up to $251 per share on Badger Meter stock, these analysts not only hold the most bullish and recent view on the company but are also projecting a new 52-week high—signaling a potential double-digit rally ahead.

Since Badger Meter now trades at 80% of its 52-week high, realizing this valuation would mean a net potential rally of 322.2% from where it trades today. Investors rarely find such a defensive name sitting on this much upside, making this set-up enticing at best.

A Premium Ahead of 3M

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Whenever the broader market is willing to overpay for any given stock, investors can rest in the assumption that there must be a reason for this willingness, and in the case of 3M stock, a 20.2x price-to-book (P/B) ratio means a steep premium to other names in the industry, which trades at an average of only 2.0x P/B today.

Just as exposed to this tariff tailwind as Badger Meter, 3M can deliver a smooth ride higher for some investors willing to get their portfolios working in this area of the economy, and the recent institutional buying activity sure shows this could be the base case moving forward.

Allocators from Wellington Management Group led the most recent institutional buying spree when they boosted their 3M stock holdings by 0.4% as of March 2025, bringing their net position to a high of $79.3 million today. However bullish this decision may seem, it is only a drop in the $3.5 billion institutional buying bucket reported for the past quarter.

Caterpillar Connects the Dots For All

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If this belief turns out to be correct and infrastructure spending to build the necessary space to boost domestic production occurs, then there is one stock that can connect it all together in this new wave, and that stock is Caterpillar.

Knowing that the connection exists to make this a potential buy target for other investors, short sellers have decided that the juice isn’t worth the squeeze in betting against Caterpillar. This is why the stock’s short interest declined by as much as 3.6% over the past month alone, a clear sign of bearish capitulation.

Reiterating this thesis’s presence in the market today, up to $6.3 billion of institutional capital also made its way to Caterpillar stock over the past quarter, making it one of the places to be in for those looking into additional upside for the coming months.

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Badger Meter Gets an Upgrade—2 Stocks That Could Follow

The Case for Badger Meter Stock

A Premium Ahead of 3M

Caterpillar Connects the Dots For All

Where Should You Invest $1,000 Right Now?

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