Here’s Madison Dividend Income Fund’s Investment Thesis for Honeywell (HON)
Madison Investments, an investment advisor, released its “Madison Dividend Income Fund” third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund (Class Y) appreciated +10.1% and outperformed the +5.9%, +9.4%, and +8.2% returns for the S&P 500, Russell 1000 Value, and Lipper Equity Income peer group, respectively. YTD, the fund returned +9.5% compared to +22.1%, +16.7%, and +16.2% returns for the indexes. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Madison Dividend Income Fund highlighted stocks like Honeywell International Inc. (NASDAQ:HON) in the third quarter 2024 investor letter. Honeywell International Inc. (NASDAQ:HON) is an industrial conglomerate, engages in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses. The one-month return of Honeywell International Inc. (NASDAQ:HON) was 7.97%, and its shares gained 21.08% of their value over the last 52 weeks. On October 17, 2024, Honeywell International Inc. (NASDAQ:HON) stock closed at $219.55 per share with a market capitalization of $143.02 billion.
Madison Dividend Income Fund stated the following regarding Honeywell International Inc. (NASDAQ:HON) in its Q3 2024 investor letter:
"This quarter we are highlighting Honeywell International Inc. (NASDAQ:HON) as a relative yield example in the Industrials sector. HON is a premier industrial conglomerate with leading businesses in commercial aerospace, industrial automation, energy sustainability solutions, and building automation. A common theme across these end markets is that HON embeds its products into the operations of its customers, which generates recurring revenue from aftermarket products/services and leads to high customer switching costs. We believe HON has a sustainable competitive advantage due to its wide installed base of equipment, strong reputation, pricing power, high customer switching costs, and technological expertise.
Our thesis on HON is that it appears well positioned for consistent growth, driven by a recovery in commercial aerospace following the Covid pandemic coupled with favorable secular trends in automation, remote security management and energy savings in buildings. The company made a strategic shift in recent years away from lumpy product sales towards connected systems and software, which lowers cyclicality and increases recurring revenues; we estimate that 30% of revenues are recurring in nature. This focus on software and recurring revenues has resulted in strong returns on invested capital (ROIC) over time that have easily exceeded the company’s weighted average cost of capital (WACC), something we expect to continue for years to come…” (Click here to read the full text)
A bustling industrial facility with a series of chemical filtration systems on display.
Honeywell International Inc. (NASDAQ:HON) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 50 hedge fund portfolios held Honeywell International Inc. (NASDAQ:HON) at the end of the second quarter which was 52 in the previous quarter. While we acknowledge the potential of Honeywell International Inc. (NASDAQ:HON) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.