Trader: Buy this industrial stock to play the Amazon story

  • Virtus Investment Partners’ Joe Terranova bought Honeywell as a way to capitalize on Amazon’s outperformance.
  • “I think the stock is definitely going to challenge its previous January high,” he said on Thursday’s “Halftime Report.”
  • Shares of the industrial giant are up more than 11% in the last month.

The high-flying "FAANG" names and the tech sector more generally are responsible for much of the broader markets' gain this year. But there are other ways to play tech's tear without getting in on what some investors are warning is an increasingly crowded trade.

Virtus Investment Partners' Joe Terranova is doing just that: he bought industrial giant Honeywell because he believes it's a "great way to play the Amazon story."

He specifically likes the company's Intelligrated unit, which "creates warehouse efficiency for e-commerce giants." The Honeywell unit's largest customer is Amazon, and the company most recently helped the e-commerce giant design and develop a new 600K square foot fulfillment center in Calgary, Alberta. Honeywell acquired Intelligrated in 2016 for $1.5 billion in cash.

Honeywell hit an all-time intraday high of $165.13 on January 29, and Terranova believes the stock is "definitely going to challenge" that level. On Thursday's "Halftime Report" he also compared the company to another industrial name, saying that "what's fascinating about the story is it's such a different story than what you're seeing at GE."

Robotics at Honeywell Intelligrated.
Source: Honeywell
Robotics at Honeywell Intelligrated.

Shares of Honeywell have risen more than sixteen percent in the past year, while GE's have fallen nearly fifty percent. The XLI, an ETF that tracks the industrial sector, is up just over 11% in the same time frame.

Terranova bought Honeywell last Friday following the company's Q2 earnings report. The New Jersey-based company beat analyst expectations for both EPS and revenue - boosted by growing sales and an increase in profit margins - and also increased its full-year earnings guidance. The stock currently trades at 18.5X forward earnings, and yields 1.87%.