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Honeywell International (HON) Stock Reaps Benefits of a Strong Balance Sheet

Fiduciary Management, Inc recently released its Q1 2020 Investor Letter, a copy of which you can download below. The FMI Large Cap Fund posted a return of -23.0% for the quarter, underperforming its benchmark, the S&P 500 Index which returned -19.60% in the same quarter. You should check out Fiduciary Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Fiduciary Management highlighted a few stocks and Honeywell International Inc (NYSE:HON) is one of them. Honeywell International is a technology and manufacturing company. Year-to-date, HON stock lost 25.5% and on May 15th it had a closing price of $125.41. Its market cap is of $92.3 billion. Here is what Fiduciary Management said:

“Honeywell has established market-leading positions in innovative technologies. They have an excellent service and support network, with a large installed base of equipment. This installed base is mission-critical and creates aftermarket sales opportunities. The ROIC is greater than 20%. The company has a strong and deep management bench and an excellent corporate culture. Honeywell is conservatively-run from a business, accounting, and balance sheet perspective. With exposure to Aerospace (45% of profit) and Oil & Gas (15-20% of profit), the stock came under recent pressure. Within Aerospace, commercial aftermarket, defense, and commercial original equipment account for 16%, 14%, and 8% of total company sales, respectively, the latter of which includes business jets and general aviation. Oil & Gas has proven to be resilient as it is predominantly mid/downstream, with the upstream accounting for just 2-3% of total sales. The company has a strong balance sheet. The stock trades at a mid-teens free cash flow multiple.”

In Q4 2019, the number of bullish hedge fund positions on HON stock decreased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with HON’s growth potential.

Disclosure: None. This article is originally published at Insider Monkey.

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