Jim Cramer isn’t the only one who thinks Honeywell needs to reshape its sprawling portfolio. The news Activist hedge fund Elliott Management on Tuesday disclosed a more-than-$5 billion stake in Honeywell —arguing the industrial conglomerate should consider a breakup. Elliott’s position in Honeywell is its largest ever in a single stock, according to Bloomberg News, which first reported the activist’s plans. Shares of Honeywell jumped as much as 8% on the news to an all-time intraday high near $243 shortly after Tuesday’s open. The stock’s advance cooled off a bit since that initial pop. “The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification,” Elliott wrote in a letter to the company’s board of directors. The crux of Elliott’s plan is a separation of Honeywell’s aerospace and automation businesses into standalone companies. Doing so will help the company “realize its full potential,” Elliott wrote. “In fact, we believe a separation could result in share price upside of 51-75% over the next two years – a remarkable improvement for any business, let alone a $150 billion industrial bellwether,” the hedge fund argued in its letter. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input,” Honeywell spokesperson Stacey Jones said in a statement to CNBC. “Our leadership welcomes investor feedback as we continue to execute a disciplined strategy, which includes pursuing sustainable growth, optimizing the portfolio, and maintaining an accretive capital deployment program.” Big picture Elliott’s announcement follows a period of sluggish organic revenue growth for Honeywell, weighing on its stock performance versus its peers and frustrating Wall Street analysts and investors alike. Through Monday’s close, Honeywell shares rose 7.4% year to date, compared with a roughly 25% advance for the S & P 500’s industrials sector . The underperformance is not new. Honeywell’s stock is up nearly 32% over the past five years compared with a 92% gain for the broader S & P 500 . Since taking over as CEO in June 2023, Vimal Kapur has made strides to reshape Honeywell’s wide-ranging portfolio to focus on more profitable businesses. In 2024 alone, Honeywell completed its nearly $5 billion acquisition of HVAC firm Carrier Global’s security unit. The deal was made to help boost Honeywell’s building technologies segment, which had been struggling with low revenue growth. Last month, Honeywell also announced a spin-off of its advanced materials unit in an effort to sharpen its focus on more attractive areas. Bottom line The Club is in full support of Elliott’s vision for Honeywell and does not plan to trim its stake into Tuesday’s rally. Jim has long said Honeywell was too diversified for its own good and needed to be streamlined. Elliott’s arrival should be the much-needed push Honeywell management needs to aggressively reshape its massive portfolio and ensure its attractive businesses are appropriately valued by Wall Street. We’d been trimming our position into strength over the past week due to frustration with execution at the company, leading to an uncertain growth outlook for the overall business. Now the major portfolio shakeup we’ve been calling for lately seems more likely with Elliott involved. “It’s huge. We’re not going to sell it. We’ve been selling because we’ve felt the operations were poorly run,” Jim said Tuesday. “One of the reasons we’ve felt so aggrieved [by Honeywell’s performance] is that these assets are premier assets. The aerospace asset is a premier asset.” (Jim Cramer’s Charitable Trust is long HON. 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.
Jim Cramer isn’t the only one who thinks Honeywell needs to reshape its sprawling portfolio.