MSCI Inc (MSCI)
Current: 631.38
Price target: Members Only
The United States is the not the only country awaiting the Middle East conflict to end. All around the globe, countries are experiencing energy inflation, supply chain disruptions, and extreme uncertainty around the war between the U.S. and Iran, But with the possibility of a peace deal now emerging, we’re starting to see confidence return, especially in markets that are more sensitive to oil prices, trade routes, and global capital flows.
Let’s face it…U.S. equities are getting expensive. The S&P 500’s P/E and P/S ratios are both trading above historical averages. The S&P 500’s forward P/E is currently around 22.8x, while its price to sales ratio is near 3.7x, well above long term averages. That doesn’t mean the market has to crash, but it does mean investors are paying a premium for U.S. stocks at a time when a lot of good news is already priced in.
The Emerging Markets Play
Emerging markets have lagged U.S. equities for years, but the setup is starting to look more attractive. Valuations are cheaper and many of these countries are directly tied to the themes investors care about right now…energy security, commodities, infrastructure, supply chain diversification, and global manufacturing.
For years, U.S. stocks have dominated global markets, mainly because of mega cap tech, AI, stronger earnings, and deeper capital markets. But that dominance has also created a concentration problem. Investors who only own the S&P 500 are heavily exposed to U.S. mega cap tech and the American economy. MSCI Emerging Markets offers a different kind of exposure…Taiwan semiconductors, South Korean technology, Indian financials and consumer growth, Chinese internet/e-commerce, Latin American commodities, and Middle Eastern energy linked markets.
Risk
Emerging markets are cheaper for a reason. They come with currency risk, political risk, weaker governance, China exposure, commodity cycles, and more volatility than the S&P 500. So this is not a replacement for U.S. equities, it’s a diversification play.
Please note that the stock includes risks and price targets are subject to change based on market developments and company updates. These stocks usually take time to come around and the outlook may change. Trade at your own risk.
Honeywell International (HON)
Current: 237.86
Price target: Members Only
A multiple expansion is imminent for Honeywell as the company gets ready to complete its spinoff of its aerospace division and focus on automation. Honeywell’s automation business is split into three segments:
- Building Automation
- Process Automation & Technology
- Industrial Automation
The general focus is to make buildings, refineries, chemical plants, LNG facilities, warehouses…etc. “smart” through sensors, control systems, HVAC controls...etc.
Honeywell, as a conglomerate, owned both the automation business and aerospace business, but management is moving forward with a spinoff late June. Why? Because the market has historically had a hard time valuing Honeywell properly as one big conglomerate. Aerospace, building controls, industrial automation, warehouse technology, energy software, and specialty materials all sat under one roof, which made the story harder to understand.
By spinning off aerospace, Honeywell becomes a cleaner automation focused company. That matters because pure play automation companies often receive better valuation multiples than slow moving conglomerates (hence our multiples expansion argument).
Quantum & Honeywell
Honeywell also has a sneaky quantum computing angle through Quantinuum, a private quantum company it owns a big stake in. This isn’t really moving Honeywell’s earnings today, but it gives the company some long term upside if quantum computing becomes a real commercial market. Quantinuum is still early, but it’s working on both quantum hardware and software, and if the technology eventually takes off in areas like cybersecurity, drug discovery, AI, and complex simulations, Honeywell’s stake could become a valuable asset.
Quantinuum goes public at a strong valuation, investors will be able to clearly see what Honeywell’s stake is worth. That could unlock some hidden value and give Honeywell a “bonus” quantum angle on top of its automation and aerospace spinoff story…expected IPO is June (unconfirmed).
Risk
Investors are expecting the aerospace spinoff and automation focus to unlock value, but if the remaining business doesn’t grow fast enough, the stock may not get the multiple expansion bulls are hoping for. Automation is attractive, but it is still tied to industrial spending, construction activity, energy projects, and customer budgets, so a slowdown could hurt demand. The Quantinuum IPO is also more of a bonus catalyst than a guaranteed win, because quantum computing is still early and not producing major profits yet.
Please note that the stock includes risks and price targets are subject to change based on market developments and company updates. These stocks usually take time to come around and the outlook may change. Trade at your own risk.
You've reached the end of our complimentary public watchlist. For full access and real time updates, please navigate to our Hyper Stocks Pro membership.
You've reached the end of our complimentary public watchlist. For full access and real time updates, please navigate to our Hyper Stocks Pro membership.
You've reached the end of our complimentary public watchlist. For full access and real time updates, please navigate to our Hyper Stocks Pro membership.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of capital. Always conduct your own research or consult with a licensed financial advisor before making investment decisions.
Hyper Stocks and its contributors may hold positions in some of the securities or assets mentioned above. These positions are subject to change without notice. Any opinions expressed reflect current views at the time of writing and are not guarantees of future performance. Past performance does not guarantee future results.