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Honeywell: A "Trump" Trifecta
03/30/2017 2:50 am EST
If there’s such a thing as a Trump stock, Honeywell International (HON) is it. The company is a trifecta for the three sectors set to benefit most in a Trump administration: energy, defense and infrastructure, asserts Jim Pearce, chief strategist and senior editor for Investing Daily's Personal Finance.
Better still, we already own Honeywell in our Growth Portfolio. With more than 100,000 employees in 70 countries, Honeywell is one of the largest industrial conglomerates in the world.
The beauty of Honeywell is that it is primarily in the business of making other company’s products perform better by adding mechanical and electronic controls to that equipment.
So no matter which jet plane or helicopter manufacturer wins a government contract, one or more of Honeywell’s control systems most likely will end up in that aircraft. In some instances, a single aircraft may have as many as 15 of Honeywell’s mechanical, electronic, power and connectivity systems.
Honeywell also can boast the best track record for getting business. The company won more contracts for major aerospace systems over the past four years than all of its competitors combined.
Now that the government contract pie is growing bigger, Honeywell can expect a proportionately sized jump in its share of Trump’s proposed $54 billion increase in the defense budget.
Although Honeywell’s attributes as a Trump stock may dazzle you, don’t ignore the company’s other impressive ways of generating revenue.
With the construction industry in full tilt, Honeywell’s original business of providing mechanical systems to residential and commercial buildings is also picking up. That core business keeps Honeywell grounded when defense spending slows down or the energy sector suffers a slump.
Plus, if the energy sector begins ramping up the type of production and pipeline infrastructure projects Trump alluded to in his address to Congress, Honeywell’s growth in earnings per share should exceed the 8% compound annual growth rate the company racked up over the past five years.
And that growth rate happened under a presidential administration far less generous to the defense and energy sectors. For all those reasons, Honeywell merits a higher price limit. Buy up to $135.
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