The COVID-19 pandemic couldn't have come at a more difficult time for the industrial sector. U.S. industrial production had already declined for six straight months heading into January on a year-over-year basis. When you throw in the COVID-19 pandemic, and it's no surprise to see the sector notably underperforming the S&P 500 in 2020. 

That said, there are still opportunities out there for long-term investors willing to stomach some near-term risk. Beverage can manufacturer Ball Corp. (NYSE:BLL) is a largely recession-proof option, Norfolk Southern (NYSE:NSC) railway is a relatively safe way to play a recovery, and Honeywell International (NYSE:HON) is a blue-chip stock on sale. Let's take a closer look at these three companies.

1. Ball Corp.

The case for buying Ball is a relatively simple one. The end demand for beverage cans is relatively stable in most economic environments -- including recessionary ones -- meaning Ball's revenue should hold up well in an economic slowdown. However, its key raw material cost, aluminum, can come down significantly in price during a downturn, since the industrial economy is demanding less aluminum overall.

A stock chart with various lines

Image source: Getty Images.

An example of how this might work is seen in the company's results during the last recession in 2008-2010. Revenue did fall in 2009, but costs came down even more. Consequently, gross profit and earnings before interest, tax, depreciation, and amortization, or EBITDA, both rose through the last recessionary period.

Ball Corp.

2010

2009

2008

Revenue

$7.63 billion

$6.71 billion

$6.83 billion

Cost of sales

$6.26 billion

$5.52 billion

$5.70 billion

Gross profit

$1.38 billion

$1.19 billion

$1.13 billion

EBITDA

$1.03 billion

$0.90 billion

$0.83 billion

Data source: Ball Corp SEC filings.

In addition, Ball's position as one of the big five metal beverage can manufacturers in North America gives it a relatively secure business moat. The fact that Ball's customers tend to be on long-term supply contracts adds some security as well. Meanwhile, there's a long-term growth opportunity from the possibility that consumers will continue to warm to using environmentally friendly recyclable aluminum over plastic.

Trading on 37 times current earnings, Ball Corp. isn't the cheapest stock in the market, but its long-term growth prospects look good and its recession-resistant properties make it worth buying for cautious investors.

BLL PE Ratio Chart

Data by YCharts

2. Norfolk Southern

When the economy eventually recovers from the COVID-19 pandemic, it's a good idea to focus on companies that are a safe bet to recover in line with the economy. In this context, railroad companies like Norfolk Southern are a good option.

The Class 1 railroads own their own infrastructure and operate as effective duopolies in the U.S., with CSX and Norfolk Southern dominating in the East Coast. In other words, Norfolk Southern has a very strong market position, meaning there's little competitive risk.

Moreover, since the railroads are the veins and arteries of the industrial economy, their revenue tends to follow in line with growth, all of which makes Norfolk Southern a pretty reliable play on a recovery.

NSC Revenue (Quarterly) Chart

Data by YCharts

In addition, the railroads have a long-term growth opportunity from the adoption of Precision Scheduled Railroading, or PSR, management techniques. In fact, before the COVID-19 crisis hit, all the listed U.S. Class 1 railroads were predicting improvements in profitability. 

The first chart above shows how much Norfolk Southern's earnings-based valuation has fallen. Throw in the current dividend yield of 2.6%, and the stock is attractive for income-seeking investors looking for a long-term holding.

3. Honeywell International

Probably the riskiest of the three picks, Honeywell's exposure to commercial aviation means there's a level of uncertainty around the timing of a recovery in its earnings. On the other hand, Honeywell is a company with a rock-solid balance sheet, meaning it's more than capable of withstanding a recession.

For example, its debt-to-equity ratio is lower than that of its multi-industry industrial peers. Also, it easily covers its interest payments with its earnings before interest and taxation, or EBIT.

HON Debt to Equity Ratio Chart

Data by YCharts

And if you had a third hand, you could also see that Honeywell has a lot of other businesses that can grow given an improvement in the economy. For example, its warehouse automation business, Intelligrated, is a great way to play growth in e-commerce logistics.

Meanwhile, before the crisis hit, some of Honeywell's businesses looked to be on track for a good recovery in 2020. For example, management cited strong orders growth in process solutions and Honeywell UOP (catalysts for refining) during its fourth-quarter earnings call.

Honeywell certainly faces near-term risk as its second-quarter earnings are likely to be horrible, but it's now trading on lower earnings valuations than it did before the last recession began.

HON PE Ratio Chart

Data by YCharts

That seems too cheap for a high-quality company like Honeywell, despite the near-term risk. All told, on a risk/reward basis, the stock is attractive for long-term investors willing to tolerate some risk.