Graco Inc. (GGG), Honeywell International Inc. (HON) & Dover Corp (DOV): 2 Multi-Industry Names to Buy, 1 to Hold

Active diversification

Dover Corp (NYSE:DOV) is steadily progressing in its transition from a cyclical machinery stock to a diversified industrial company with above-average margins and growth opportunities. However, manufacturing companies with bigger backlogs and more late-cycle exposure are always criticized and punished by the market. Therefore, despite outstanding progress in terms of diversification, the stock has hardly managed to beat the market (year-to-date +25% versus the S&P 500 20%). The out-sized energy exposure could spook some industrial investors but the business is solidly profitable at 25% EBIT. It’s also well diversified across drilling, production, and downstream operations. Dover Corp (NYSE:DOV)’s handset exposure is also unfamiliar to most industrial investors, and while it is small as a percent of sales, profitability is uneven and exposes Dover Corp (NYSE:DOV) to often fickle consumer electronics.

The valuations are attractive as well. Despite a 70% rally in the last 12 months or so, the stock is still trading at a forward multiple of 14x, which is equivalent to the industry average. Above all that, the stock pays a dividend yield of 1.7%.

Final word

Weaker-than-anticipated growth in most parts of the world have helped most of the multi-industry stocks to trade at discount multiples. This has presented good money-making opportunities in the form of Dover Corp (NYSE:DOV) and Honeywell International Inc. (NYSE:HON). However, some companies, like Graco Inc. (NYSE:GGG), have already witnessed above-average gains, which means that it might be late to invest in these companies.

Zain Abbas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article 2 Multi-Industry Names to Buy, 1 to Hold originally appeared on Fool.com.

Zain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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