If you’ve followed along with me for any length of time, then you know I’m not afraid to make bold calls.
And not to toot my own horn – well maybe just a tad – they are very often on the money.
Back in 2013, I was the first analyst to predict that Apple Inc. (Nasdaq:AAPL) would hit $1,000 on a split adjusted basis.
And in the summer of 2014, I forecast that Microsoft Corp. (Nasdaq:MSFT) would become a great company under then new-CEO Satya Nadella.
Both those predictions were dead accurate.
Today, I want to remind you of a call I made more recently.
Last Dec. 14, I told you in no uncertain terms that the blockchain technology underlying crypto currencies would become an unstoppable global force.
Right on schedule, I have a new proof point. It’s a global giant that is using blockchain tech to disrupt a $5.4 billion segment of the aerospace sector.
This is a firm that’s beating the market by more than 30%. And it’s got a whole lot of upside ahead…
A High Flying Blockchain Case Study
In our Dec. 14 chat about blockchain technology, I said it would conservatively play a role in $8 trillion worth of transactions.
That’s conservative because the world’s economy is worth roughly $80 trillion a year. I believe that over time, this tech could underpin the vast majority of global commerce.
I believe the example I’m sharing with you today is a great case study of just what we’ve been talking about.
A new online marketplace in the aircraft industry is built on a blockchain, and is set to have a major impact on how buyers and sellers trade parts in real time.
It’s an important breakthrough because there are thousands of aircraft flying at any point of time. The vast majority are older planes.
So, to keep all those birds in the air, airlines and their maintenance crews must have fast access to used parts. Waiting for one to be made and shipped could easily take a couple of weeks.
Enter Honeywell International Inc. (NYSE:HON), which provides auto and aircraft components along with security systems. I’m highlighting its moves for two reasons:
1. Honeywell is part of the defense industry that I said last year would have big catalysts for blockchain tech.
2. This savvy leader is the one that created the used aircraft marketplace, using a blockchain as its backbone.
A recent story in the Wall Street Journal says Honeywell is off to a great start after launching earlier this year. Yes, the sales base of $2 million is small so far, but it is expected to grow five-fold by the end of this year.
After that, it’s off to the races…
A “Godsend” for Results
Here’s why I say that. Because of public safety, the market for aircraft parts is highly regulated. The sale of every one of thousands of parts require FAA certification.
In practical terms, that means buyers and sellers need to be able to check previous transactions, owners and repairs.
This is exactly the type of online commerce where blockchain tech excels. That’s because it is an online digital ledger.
It’s also transparent, so folks can, at any time, go and see the settlement of the contract. Even better, it’s permanent. The only way to “change” a contract is to enter into a new one that also leaves the new record open for examination.
That means the FAA could go in and monitor any part quickly, getting a snapshot of all the buyers and sellers along the way.
In the case of any accident or a safety check, this could be a godsend by delivering the results in the blink of an eye.
Now then, if all Honeywell had to offer was its foray into the world of blockchain, I wouldn’t recommend it. At present, the parts marketplace is too small a part of its business to have a meaningful impact.
However, the new blockchain initiative shows how this global giant keeps its edges sharp.
Bear in mind, this is a stock I have recommended several times in the past for its great shareholder returns. And I continue to recommend it.
A Solid Recommendation
Let me show you why.
Over the years, Honeywell has grown into a $41 billion (in sales) global industrial titan. The firm has a hand in a broad range of markets, thanks to a series of smart acquisitions.
You see, CEO Darius Adamczyk oversees a very impressive mergers and acquisitions (M&A) team. Every deal the firm has pulled off creates another wave of shareholder value.
Over the past decade-and-a-half, Honeywell has made more than 80 deals, which have all served to strengthen the firm’s 65 global brands.
Honeywell plays a dominant role in so many industries, all of which fall under four key segments: Honeywell Aerospace, Home and Building Technologies, Safety and Productivity Solutions, and Honeywell Performance Materials and Technologies.
That aerospace division is a sort of crown jewel, growing faster than overall defense and airline budgets, and boasting rock-solid profit margins
One area of focus is the firm’s approach to the “connected aircraft.” This represents an $8.2 billion market. It includes hardware, software, apps, data services and airtime services that include links to next-gen satellites.
While M&A has been a core growth driver for Honeywell, it has also helped fuel some impressive investor perks.
This past year, the firm posted more than $9 billion in adjusted earnings, which helps drive share buybacks. In fact, the firm has shrunk its share count for three straight years.
Last April, Honeywell goosed its buyback plans by adding another $10 billion in financial firepower to the effort.
Smaller share counts are a savvy way to boost per share profits, which attracts yet more investors.
Fast-rising dividends are yet another way that Honeywell draws in investors. In fact, the firm’s payout has risen by double-digits for eight straight years.
The current dividend yield of 1.9% makes this stock very competitive with intermediate term bonds. Of course, bonds don’t deliver the kind of share price appreciation that Honeywell has.
Simply put, this is a very well-run aviation-tech giant that continues to find new ways to add more value for its shareholders.
I have little doubt that the firm’s push into blockchain will turn into yet another growth pillar.
And that makes it a great foundational play that you can hold for the long haul, no matter what the markets throw our way.
You Can’t Afford to Miss Out on the 5G Explosion
Before I sign off, I want to call your attention what’s been happening with the monumental roll-out of 5G wireless cellular technology.
According to a recent report from a major European telecom-equipment provider, some 45% of the world’s population – about 3.4 billion people – will be able to access 5G networks by 2024. That figure is much higher, and achieved much faster than previously thought.
The firm has had to revise its subscription forecast upward by 27% since November.
Now, we’ve identified another tech firm with the potential to completely dominate the 5G space. They’ve just secured three lucrative 5G patents. And they’re brilliant ‘small cell’ technology is helping make 5G work all across America.
Cheers and good investing,
Michael A. Robinson