The Nasdaq Composite is officially in a bear market, which is defined as a decline of at least 20% from its peak. And within that broader plunge, many well-known companies have seen their stock prices fall by 75% or more from their highs.
On the other side of that equation, some companies are defying the trend, either with smaller-than-average losses or even with gains for the year. Honeywell International (HON -0.91%), Piedmont Lithium (PLL 2.79%), and PTC (PTC -0.34%) all trade on the tech-heavy Nasdaq, and all are doing much better than the index year to date. Here's why each growth stock could be a good buy now.
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A catch-all way to invest in the industrial economy
Daniel Foelber (Honeywell): Industrial conglomerate Honeywell has its fingers in a wide array of pies, from aerospace and automotive products like engine control systems and braking systems to technologies that improve buildings' energy efficiency and regulate environments. Its business took a hit during the pandemic, mainly due to a slowdown in its aerospace segment. But that unit's results have rebounded nicely as commercial air travel has picked back up, and its oil and gas segment continues to put up impressive results.
Honeywell's diverse business makes it less vulnerable to economic cycles. It also keeps an incredibly tight balance sheet, which gives it the flexibility to take on debt as needed. Even after it did just that in response to the pandemic, Honeywell still sports a comparatively better debt-to-capital and financial-debt-to-equity ratios than most other defense contractors or industrial conglomerates.
HON Debt To Capital (Quarterly) data by YCharts
Those low debt-to-capital and financial-debt-to-equity ratios indicate that Honeywell's capital structure is not dependent on debt.
Honeywell is investing heavily in data-driven technologies, the Industrial Internet of Things, warehouse automation, and other ways to bolster connectivity in the industrial sector. That growth, paired with its stable and growing dividend, makes for a compelling investment thesis.
Honeywell may not be a Dividend Aristocrat, but it hasn't cut its dividend since 1995. Since 2011, management has raised the payout every year, tripling it over that period. And Honeywell just announced another quarterly dividend hike to $0.98 per share. Throw in a price-to-earnings ratio of just 24, and you have a balanced investment worth considering now.
Investors have been charged up about this growth opportunity
Scott Levine (Piedmont Lithium): Unlike the many Nasdaq stocks that have plunged since the beginning of the year, Piedmont Lithium has shot higher -- more than 25% higher. While the bears have resoundingly growled their disapproval at a variety of growth and tech stocks, bulls have been enthusiastic about the path Piedmont is taking toward developing an integrated lithium production infrastructure in the United States.
As customer demand for electric vehicles (EVs) has accelerated, interest in shoring up the supply chain of critical materials -- among them, lithium -- to meet the needs of their manufacturers has gained increasing popularity. Indeed, President Biden went so far as to invoke the Defense Production Act to secure the nation's supply of materials essential for EV production -- a move that has already benefited mineral production companies like rare-earth metals miner and processor MP Materials.
Another factor motivating investors to pick up shares of Piedmont Lithium has been optimism from Wall Street. In February, Lucas Pipes, an analyst at B. Riley, hiked his price target on Piedmont Lithium to $95 from $89, maintaining a buy rating on the stock. Similarly, Tyler Langton, an analyst at JPMorgan Chase, raised his price target to $92 from $84 in late March. The bullish perspectives of two Wall Street analysts may not seem like a lot, but they proved sufficient to motivate investors since there has been an absence of notable pessimism from bearish analysts over the past four months.
All told, the share price of Piedmont Lithium is up an impressive 31% year to date, making it one of the few Nasdaq Composite stocks crushing the index so far this year.
PTC's earnings are a rare bright spark
Lee Samaha (PTC): This is not exactly an easy time for the industrial sector, but industrial software company PTC's latest earnings report demonstrated the growth potential for game-changing solutions. The case for investing in PTC rests on the transition of its core products (computer-aided design, or CAD, and product lifecycle management, or PLM) to a software-as-a-service (SaaS) business model.
In addition, the company has strong long-term growth prospects from the adoption of its Internet of Things (IoT) and augmented reality (AR) solutions. IoT and AR are at the heart of the industrial sector's increasing adoption of digital technologies that can significantly enhance productivity.
For example, through IoT, companies can connect physical assets to the digital world to collect, monitor, and analyze data, allowing them to derive actionable insights to improve performance. Among the examples of this are systems that predict when industrial machinery will need maintenance. With AR, digital information can be overlaid to workers dealing with physical assets, such as a tablet digitally overlaying the layout of complicated machinery in need of service.
During an earnings season that has been characterized by industrial companies struggling with soaring raw material costs and supply chain issues, PTC exceeded management's expectations by reporting 13% year-over-year growth in constant currency in its core products (CAD and PLM), and 15% year-over-year growth in its growth products (IoT and AR).
Moreover, management raised its 2022 adjusted free cash flow guidance to $455 million from the previous guidance of $450 million. That should increase investors' confidence that the company will hit management's target range of $700 million to $740 million in free cash flow in 2024. So, there's a lot to like about PTC in 2022 and beyond.
