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Activist hedge fund Elliott Investment Management has responded to Honeywell’s bid to break up the industrial conglomerate. Jim Cramer says it’s good news for the stock. The News On Monday, Honeywell said it is considering spinning off its high-margin aerospace division as part of a broader effort to reshape its large business portfolio. “Honeywell is now well-positioned for significant transformational alternatives, and we are continuing with deeper and more detailed exploration of their feasibility and possible timing,” CEO Vimal Kapur said in a statement. The company plans to provide another update with its fourth quarter earnings release. Elliott, who last month took a more than $5 billion position in Honeywell and led management to split it into two stand-alone companies — one focused on automation and the other on aerospace — applauded the remarks. “We believe the portfolio transformation that Vimal and his team are leading represents the right path for Honeywell, and we look forward to completing the review and supporting Honeywell as it implements the necessary steps to realize its full value,” Elliott said. a statement Shares rose more than 3% on Monday. HON YTD mountain Honeywell International (HON) year-to-date performance The big picture Monday’s stock price pop continues the upward trend of recent weeks. Honeywell shares are up nearly 4% since the close on Nov. 11, before Elliott revealed its massive position in the company. The S & P 500 industrial sector is down 4% over that period. The performance follows a long period of stagnant revenue growth and a lagging stock price for Honeywell. Wall Street analysts have criticized the company for a lack of focus, including too many remote businesses in its massive portfolio. Undoubtedly, the company has already made progress in divesting businesses. In November, management announced plans to sell its personal protective equipment business for $1.3 billion. Before that, Honeywell said it would spin off its advanced materials business as a standalone company that could be worth $10 billion. Bottom line Honeywell seems to be considering a more aggressive approach to focus on more profitable segments. That’s great news for shareholders like Club and Elliott, who see more potential in Honeywell than it has offered investors in recent years. In particular, the aerospace division is the jewel in Honeywell’s crown, so it’s a smart move by management to address that segment sooner rather than later. “I think it’s a great thing to do,” Jim said Monday of the potential split. “This would be the pure game we are looking for.” He cited successful spin-offs from conglomerates such as GE Aerospace. “Over time it will get multiple expansions, (but) not right away,” Jim added. “And you get something, that’s actually a winner.” (Jim Cramer’s Charitable Trust is long HERE. See the full list of stocks here.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim trades. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. If Jim has talked about a stock on CNBC TV, he will wait 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR SPECIFIC TERMS AND CONDITIONS AND PRIVACY POLICY, WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR OBLIGATION SHALL BE CREATED, OR CREATED, FOR ANY INFORMATION ENTERED INTO WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
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Honeywell he answered Activist hedge fund Elliott Investment Management’s call to break up the industrial conglomerate. Jim Cramer says it’s good news for the stock.
