Small-cap industrial stocks have climbed alongside broader equity markets over the last few months, and are now narrowly lagging behind the S&P 500, but an expert says the sector has more room to run.

Dan Skubiz, senior portfolio manager at Ziegler Capital Management (ZCM), told BNN Bloomberg that several broad economic themes are helping to lift the industrial sector, particularly in the U.S.

“With U.S. government stimulus around the CHIPS act, the (federal) infrastructure bill and the Inflation Reduction Act, you have a lot of tailwinds to a lot of these businesses,” he told BNN Bloomberg in a Friday interview.

“When you combine that with some self-improvement stories, as well as high-quality operators, you get a lot of stocks that we think can really work very well in this environment.”

Skubiz recommended Sterling Infrastructure (STRL, Nasdaq), Modine Manufacturing (MOD, NYSE) and Chart Industries (GTLS, NYSE) as his top picks in the small-cap industrial sector.

Neither Skubiz, nor his family own shares of Sterling Infrastructure or Modine Manufacturing, however, he personally owns shares of Chart Industries, and Skubiz’s firm and its clients own shares in all of the stocks listed above.

None of the companies mentioned are investment banking clients at ZCM.

For the full interview, click on the video at the top of this article.