Is Honeywell International Inc. (HON) A Good Stock To Buy?

How do we determine whether Honeywell International Inc. (NYSE:HON) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Honeywell International Inc. (NYSE:HON) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately as you will see later. At the end of this article we will also compare HON to other stocks including American International Group Inc (NYSE:AIG), Toronto-Dominion Bank (USA) (NYSE:TD), and China Petroleum & Chemical Corp (ADR) (NYSE:SNP) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are assumed to be slow, old financial tools of years past. While there are greater than 8000 funds trading at the moment, our experts look at the moguls of this club, approximately 700 funds. These hedge fund managers oversee most of all hedge funds’ total asset base, and by keeping track of their finest picks, Insider Monkey has figured out a few investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s take a glance at the key action encompassing Honeywell International Inc. (NYSE:HON).

How are hedge funds trading Honeywell International Inc. (NYSE:HON)?

At the Q3’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the most valuable position in Honeywell International Inc. (NYSE:HON), worth close to $197.1 million, accounting for 1.3% of its total 13F portfolio. On GAMCO Investors’s heels is Anchor Bolt Capital, led by Robert Polak, holding an $119.9 million position; the fund has 4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Anand Parekh’s Alyeska Investment Group.

Judging by the fact that Honeywell International Inc. (NYSE:HON) has experienced a drop in interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their entire stakes heading into Q4. At the top of the heap, Jonathan Barrett and Paul Segal’s Luminus Management dumped the biggest stake of all the hedgies followed by Insider Monkey, worth about $66.3 million in call options., and Benjamin A. Smith of Laurion Capital Management was right behind this move, as the fund dropped about $35.7 million worth of stock. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Honeywell International Inc. (NYSE:HON). We will take a look at American International Group Inc (NYSE:AIG), Toronto-Dominion Bank (USA) (NYSE:TD), China Petroleum & Chemical Corp (ADR) (NYSE:SNP), and U.S. Bancorp (NYSE:USB). This group of stocks’ market values match HON’s market value.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $3.47 billion, compared to $1.29 billion in HON’s case. American International Group Inc (NYSE:AIG) is the most popular stock in this table with 94 funds reporting stakes as of September 30, while China Petroleum & Chemical Corp (ADR) (NYSE:SNP) is the least popular one with only 7 bullish hedge fund positions. Honeywell International Inc. (NYSE:HON) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AIG might be a better candidate to consider a long position.