We recently published a list of 10 Worst Performing Dow Stocks Year-to-Date. In this article, we are going to take a look at where Honeywell (NASDAQ:HON) stands against other worst performing Dow stocks year-to-date.
After the disastrous performance of 2022, the market has recovered better than expected and is on a growth trajectory. According to BlackRock’s Q4 2024 Equity Market Outlook, despite concerns about the economy, fundamentals have kept stocks resilient. Opportunities are seen in large-cap stocks, which may outperform both mega and small caps.
Volatility is viewed as normal and can create buying opportunities, especially when driven by market sentiment rather than fundamentals. Historically, market corrections of 10% or more are common but long-term investors have still enjoyed solid returns.
The report states that elections and Fed rate cuts may also impact the market, with rate cuts typically benefiting large-cap and high-quality stocks. Healthcare and consumer staples sectors have traditionally performed well after rate cuts, while cyclical sectors may improve as the economy recovers.
Finally, it mentioned that technology, which is usually a laggard in rate-cutting cycles, looks well-positioned this time due to innovations like AI. Long-term patience is essential in navigating volatility, as the market has proven resilient over decades through various crises.
Evaluating Volatility and Valuations in Today’s Stock Market
In a CNBC interview, chief strategist and economist of Solus Alternative Asset, Dan Greenhaus discussed stock market volatility, with mega-cap earnings and the upcoming election contributing to potential fluctuations. He mentioned that the market is already experiencing some volatility, as reflected in the elevated VIX. Despite this, he highlighted that the economy is still growing, albeit at a slower pace, and earnings are rising, which is creating a generally favorable environment for equities.
Greenhaus also addressed concerns about market valuations and noted that while current multiples are high historically, determining what constitutes “rich” valuation levels can be difficult without hindsight.
Lastly, Greenhaus referenced a trading strategy of “buying high and selling higher,” suggesting that investors should remain engaged in the market even during record highs.
Our Methodology
For this article, we checked the year-to-date performance of all the Dow components and selected 10 stocks out of 30, that had the worst share price performance on a year-to-date basis on October 21. We listed the stocks in descending order of their share price performance. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Honeywell (HON): Spin-Off Plans and Short-Cycle Challenges Impact Dow Performance
A shot of a commercial plane with a blur of color in the background, representing the production of auxiliary power units in the Safety and Productivity Solutions segment.
Eighth on our list of worst performing Dow stocks is Honeywell International Inc. (NASDAQ:HON), which is an American conglomerate that serves a wide range of industries globally. Its services include aerospace technologies, energy-efficient solutions, specialty chemicals, and advanced materials. The company is planning to spin off its advanced materials segment which is expected to be completed by the end of 2025 or the start of 2026.
While Honeywell’s (NASDAQ:HON) stock has been recovering over the last few weeks, gaining over 10% in the last 30 days, the stock faced some challenges in the first half. In Q1, the company experienced a decline in its Building and Industrial Automation segments due to reduced demand for short-cycle products.
After its Q2 report, the stock declined after its earnings report, where it lowered its EPS guidance due to continued slower recovery in its short-cycle business. Margins were under pressure due to the mix of lower-margin short-cycle business recovery.
On October 8, TipRanks reported that Analyst Nicole Deblase from Deutsche Bank kept a Hold rating on Honeywell (NASDAQ:HON) and reduced the price target from $236 to $226. She made this decision because the company plans to spin off its Advanced Materials business to focus on key areas like aerospace, automation, and energy transition.
The analyst warned that this spin-off might cause a 10% drop in revenue and a similar decrease in earnings per share, although share buybacks could help lessen the impact.
Deblase believes that the Advanced Materials division could still perform well as a separate company, but she showed caution. She pointed out that the company has not done as well as its competitors, which raises questions about its overall business model. While she doesn’t foresee a major breakup of the company beyond this spin-off, she believes any future asset sales will be smaller.
Overall, HON ranks 8th on our list of worst performing Dow stocks year-to-date. While we acknowledge the potential of 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 more promising than HON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
