Honeywell International Inc. (NYSE:HON) has announced its second quarter 2015 financial results, surpassing Wall Streets’ earnings and revenue expectations. The conglomerate reported EPS of $1.51 on net sales of $9.8 billion for the period. The market had consensus earnings estimates of $1.49 per share over revenues of $9.75 billion for the second quarter. Honeywell’s EPS improved by 9% year-over-year, whereas its net sales were down by 5% in comparison with the same quarter last year. While discussing the financial results, Dave Cote, CEO of Honeywell International Inc. (NYSE:HON), said, “We delivered 3% core organic sales growth and had another quarter of double-digit earnings growth when normalized for tax. We saw growth acceleration in both the short- and long-cycle businesses within Aerospace, continued growth in our commercial and industrial businesses within ACS, and higher volume across our Advanced Materials portfolio, particularly in Fluorine Products.” These promising results allowed Honeywell International to improve its annual EPS guidance by $0.05 to $6.05-$6.15 for fiscal 2015. The company has maintained its previous guidelines for annual sales and free cash flow.
In a recent Pentagon defense contract deal, Honeywell International Inc. (NYSE:HON) received a contract worth $41.4 million for supplying APN-209 radar altimeters to the U.S. Army and federal civilian agencies. While talking about the company at an investment conference in New York this week, Nelson Peltz of Trian Partners had this to say about the company, Cote, and its other management, “I think the guy running Honeywell […], he knows how to run a conglomerate. There aren’t a lot of conglomerates out there that we agree with; that’s one that we do. They’ve proven their mettle, that they can run these diverse businesses, they know when to get out of them, they know when to get in them, and they do a great job. You know, you’ve gotta earn the right to be a conglomerate, and they have.”
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The shares of Honeywell International Inc. (NYSE:HON) are up 5.68% year-to-date and by 1.96% today. Smart money as a whole agreed with Peltz, maintaining a bullish outlook for the shares of the conglomerate during the first quarter, as 48 hedge fund managers having $1.29 billion in shares of the company at the end of the first quarter, up from the aggregate investments of $1.13 billion at the end of the fourth quarter of 2014. It is worthwhile to mention that the shares of the company improved by 4.39% in the first quarter, leading to an increase in aggregate investments.
We don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 139%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
We also track insider transactions (hence our name), and find that 12 insider sales have taken place in the past six months at Honeywell. CEO Cote made the largest insider sale by selling 303,798 shares of the company on February 23 at a price of $104.27 per share.
With all of this in mind, let’s review the fresh smart money action regarding Honeywell International Inc. (NYSE:HON).
How have hedgies been trading Honeywell International Inc. (NYSE:HON)?
Heading into the second quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long in this stock, with no change from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially.
According to hedge fund intelligence website Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Honeywell International Inc. (NYSE:HON). Adage Capital Management has a $351.5 million position in the stock with 3.37 million shares, comprising 0.9% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $228.47 million position of 2.19 million shares; the fund has 1.19% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Cliff Asness’ AQR Capital Management, Robert Polak’s Anchor Bolt Capital, and Alexander Mitchell’s Scopus Asset Management.
During the first quarter, some of the leading hedge fund managers cut their positions in Honeywell International. At the top of the heap, Jim Simons’ Renaissance Technologies sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $19.9 million in stock. David E. Shaw’s fund, D E Shaw, also cut its stock, about $15.1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same, though the funds tracked by Insider Monkey collectively bought more shares of the company.
A solid second quarter and positive sentiment among hedge fund investors indicate growth in the upcoming months. We recommend a buy for the shares of the company.
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