We're playing the long game on this industrial that's strong in aerospace, buying the dip

Published Tue, Aug 15 202312:16 PM EDT

We're buying 25 shares of Honeywell (HON), at roughly $188 each. Following Tuesday's trade, Jim Cramer's Charitable Trust will own 505 shares of HON, increasing its weighting in the portfolio to 3.3% from 3.14%. As discussed during Tuesday's Morning Meeting, we are picking up more shares of Honeywell . This aerospace-focused industrial has been down and out since it reported earnings a few weeks ago . Although the company beat earnings expectations in the second quarter, it did not raise its full-year outlook enough to satisfy the Street, thus raising concerns about its growth profile. Honeywell may not be hitting it out of the park right now like some of other industrials — especially ones that are making it on price, such as fellow Cub name Caterpillar (CAT) — but there are still plenty of reasons to be optimistic about in the future. Honeywell's largest segment aerospace had a strong quarter with organic sales up 16% year-over-year and margin expansion of 120 basis points. HON YTD mountain Honeywell YTD performance Indeed, all is not perfect though. There are drags to the business impacting the company's growth profile. We are specifically talking about the Building Technologies unit (HBT) that posted flat sales, which was a surprise to us given a surge in sustainability and energy-efficiency investments. Additionally, the Safety and Productivity Solutions unit (SPS) remains under pressure due to weak volumes for warehouse automation projects. However, we are encouraged by how management expects HBT growth to reaccelerate into next year and see the warehouse automation business "bouncing on the bottom of the cycle." Once these end markets show signs of improvement, they should lift the overall growth rate of the company and get the stock back working again. One more reason to stick with Honeywell is its attractive valuation. JPMorgan pointed this out in its post-second quarter update on July 31. The analysts there have an overweight (buy) rating and a $215-per-share price target on the stock. JPMorgan said that HON traded at a 2% discount to its sector versus a historical premium of 10% on average. Based on how Honeywell has continued to act poorly this month, the valuation discount has likely widened from there. Buying Honeywell at a discount to its group may prove to be opportune to patient investors like us as we envision the stock returning to a premium as some of its key business lines bottom and return to growth. (Jim Cramer's Charitable Trust is long HON, CAT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An aircraft engine is being tested at Honeywell Aerospace in Phoenix.

Alwyn Scott | Reuters