Stimulus bills and small-business financing aside, investing in the stock market can be a worrisome ordeal when the worst of the COVID-19 (coronavirus) pandemic has yet to hit many cities.

Choosing companies with strong fundamentals with long-term tailwinds can make that process less worrisome. Here are three industrials with varying degrees of risk to round out your portfolio:

Close up of the blades of a jet turbine engine.

Image Source: Getty Images.

Waste Management

Short-term struggles

Waste Management (NYSE:WM) stock has finally come down in price, and for good reason. America's largest waste collection, transportation, and disposal company relied on the industrial and commercial sectors for 70% of collection revenue and 46% of total revenue in 2019. Rising unemployment, lower industrial production, and lower consumption of goods and services all spell less revenue for Waste Management in the near term.

But that's OK. Waste Management's residential sector and strong balance sheet will help the company through this difficult time. In terms of obligations, the company's FCF easily covers dividend obligations, meaning Waste Management's dividend is safe and sound. 

Long-term upside

As for the long-term, Waste Management has two prevailing tailwinds -- a lack of competition and the growing quantity of waste produced by an ever-increasing, consumer-driven population.

Its transition from diesel to liquefied natural gas (LNG) and compressed natural gas (CNG) for its trucking fleet; its conversion of waste into energy; and its status as the largest recyclables collector make it a company that's beneficial to the environment as well. 

The extent of Waste Management's integrated value chain -- from pickup to transportation to the handling of that waste -- positions it as a compelling choice for many local governments and businesses interested in the long-term benefits of responsible waste management. That is why, in addition to high barriers of entry, Waste Management is an industrial worth buying and holding

WM Chart

WM data by YCharts

Honeywell

Clocking in as another solid buy with a little more risk than Waste Management is Honeywell International (NYSE:HON). Honeywell manufactures and maintains a slew of industrial and household products and software. The company is a global technology leader and a pioneer in everything from cybersecurity to onboard vibration monitoring systems. Honeywell also licenses its brand name to retail products made by other manufacturers, like thermostats, sensors, alarm systems, heaters, fans, home generators, paper shredders, air conditioners, and more. It's likely you have Honeywell products in your home and have been exposed to them on countless occasions. 

Short-term struggles

In the short-term, a slowing economy and oil below $30 will certainly take a toll on Honeywell's construction business and Honeywell UOP, which mainly supports the downstream sector of the oil and gas industry. Across all of its businesses, manufacturing could slow as factories shut down to reduce the spread of the coronavirus.

It's undeniable that Honeywell, like many industrials, will see some major hits to its free cash flow (FCF) and earnings as long as coronavirus-related health risks persist.

Long-term upside

In addition to its diverse array of products and technologies, Honeywell's main advantage is its financial strength.

As unemployment rises and small businesses close, cash becomes coveted. During the boom times of high-flying economies, overspending sourced from debt is common. Even during such booms, Honeywell has done a good job of keeping its balance sheet in check, all the while increasing dividend payments every year for the last 20 years thanks to strong FCF.

As its dividend payment has more than quadrupled since the year 2000, Honeywell's FCF has continued to rise and now well exceeds dividend obligations. Theoretically, FCF could fall by 50% or more and Honeywell could still pay its dividend with cash. That mattered even in pre-coronavirus times because many industrials, and especially energy companies, have large dividend obligations that absorb the majority of FCF. During a time of declining revenue, which we are likely to see in the coming few quarters, the consequences are amplified. Dividend obligations can quickly exceed FCF, forcing such companies to turn to the debt markets or cut their dividends. Income investors can rest assured knowing that Honeywell's dividend is just about as solid as it gets for an industrial. 

TransDigm

Short-term struggles

A few months ago, TransDigm Group (NYSE:TDG) was a Wall Street darling that could do no wrong. Now, its shares have fallen over 45% since Feb. 1. Roped together alongside airlines and aircraft manufactures, TransDigm will likely see nothing short of a collapse in revenue until the pandemic is resolved.

Long-term upside

TransDigm is one of the largest suppliers of parts and components to new plane manufacturers and aftermarket service providers. Its high margins are a result of the company's impressive business model, based on the safety and speed of delivery.

Aftermarket parts are an often overlooked business model. The backlogs of major aircraft manufacturers such as Boeing and Airbus are impressive in terms of big-ticket revenue, but they also unlock the potential to add to the aftermarket. Commercial aircraft tend to have decades of useful life. On top of that, providing spare parts for planes is loads more complicated and niche than, let's say, the aftermarket support of a passenger sedan. It's a sophisticated market, which is why customers around the world are happy to work with TransDigm.

That being said, TransDigm is an inherently risky industrial in an economy locked down by the coronavirus.

A not-so-cheery consensus

It's hard to argue that the next few quarters will be easy for any industrial stock, and as Warren Buffett says, "You pay a very high price in the stock market for a cheery consensus." The good news is that the price for Waste Management, Honeywell, and TransDigm is now significantly lower than a few months ago because, well, the consensus isn't exactly cheery. Despite their short-term struggles, all three companies benefit from strong long-term tailwinds and fundamentals, making it a good time to push through the noise and pick up a few shares here and there.