Ultimately, companies exist to provide a product or service that satisfy the needs of their customers. Sometimes, that need is simply to find a way to do more with the same… or less.
That’s why companies that drive innovations can be big winners over time. Customers flock towards services that can provide cost savings. And that can translate into big profits for the companies that are providing that innovation. Following where the investments in money-saving ideas go can lead to those profits.
While some companies may start a new initiative, chances are a big company will look to increase its earnings power through acquisitions or strategic investments.
That’s the case with Honeywell (HON), which has bought a stake in Redaptive. Redaptive offers energy-as-a-service technologies that can improve energy efficiency and save customers money. It’s the perfect way to build on Honeywell’s existing place in the industrial conglomerate space.
Action to take: Shares are reasonable valued at about 20 times earnings, down from 27 times last year. Honeywell pays shareholders a growing dividend, with a current yield near 2.2 percent. Given current market conditions, buy a small stake now and use any further downside to add to that position.
For traders, shares have been trending down in recent weeks but now look oversold. The June $200 calls, last going for about $3.50, offer mid-double-digit returns in the weeks ahead on a bounce higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.