With the third quarter winding down, many of the top firms that we cover here at 24/7 Wall St. are starting to make some final tweaks to portfolios for the fourth quarter run. Some are taking advantage of stocks that have been sold off during the recent volatility and market correction that started in late August.
In a new report, the UBS team that covers the quality growth at a reasonable price (Q-GARP) portfolio makes a change by adding a top industrial stock. The portfolio, which has outperformed the S&P 500 since inception, is up 3.5% this year, versus the 3.3% decline in the index.
Honeywell International Inc. (NYSE: HON) makes its debut on the Q-GARP portfolio. This big cap multinational announced this summer its largest purchase in more than a decade, when it agreed to buy the utility consumption metering business of Britain’s Melrose Industries for about $5.1 billion. This is the first major deal for Honeywell since it laid out a five-year plan in March 2014 to target at least $10 billion in acquisitions. Wall Street has been very eager to see how industrial companies use their capital as many of the foreign markets struggle for growth.
Honeywell’s operations are organized under three business groups: Aerospace, Automation & Control Solutions, and Performance Materials & Technologies. The company is a premier supplier of avionics, power and control systems for the aerospace industry. The UBS team loves the exposure the company has to the “energy efficiency” secular growth theme, where 50% of revenues are derived.
Honeywell investors are paid a 2.06% dividend. The Thomson/First Call consensus price target is $116.16. Shares closed Tuesday at $100.32.
We found three other conservative stocks in the Q-GARP portfolio, two of which are also industrials, that also look like solid buys now.