Economic conditions are improving, but many industries still carry the stigma they acquired during the recession. For stocks in these industries, investor perceptions—and thus their prices—trail reality, creating great bargains for optimistic and contrarian investors. The latest Dividend Digest featured the following value stock from Personal Finance: “The recent financial crisis ravaged more than just banks and homebuilders. Manufacturers suffered their fair share of pain as weak demand prompted many businesses to draw down inventories. This touched off a negative feedback loop where delayed capital spending programs contributed to job losses, which further crimped consumer spending. ... While improving business conditions and fatter margins have bolstered stock prices, many industrial names still trade at attractive valuations, reflecting concerns about lackluster economic growth. ...
“Honeywell International, Inc. (HON, NYSE) is a hugely diversified industrial operation that produces everything from jet engines and flight-navigation systems to automation and control systems and specialty materials. One business line that shows promise focuses on technologies that reduce energy and water consumption—a major growth industry. Along these lines, Honeywell is also a leading producer of aerosols and refrigerants that replace chlorofluorocarbons (CFC, or Freon), a compound that depletes the ozone layer and is banned outright in many developed nations. Meanwhile, Honeywell’s aerospace business is staging a strong comeback. The division’s revenue dropped sharply in 2007 and 2008 as demand for small planes plunged. But resurging orders in the U.S. and strong demand in Asia and the Middle East are fueling an earnings recovery. Yielding 2.8%, Honeywell International is a buy under 47.”
Elliott H. Gue & Roger S. Conrad, Personal Finance, 10/9/10
