Given recent market weakness, it makes sense to start looking at buying stocks unduly sold off recently. That's why I think GE HealthCare Technologies (GEHC -0.65%)Johnson Controls (JCI -0.84%)and Allegion (ALLE -0.30%) are worth buying now. Here's why.

1. GE HealthCare Technologies and margin expansion

To understand the investment case for the stock, you have to appreciate management's objectives following the spin-off from GE at the start of the year. In a nutshell, now that it's an independent company, management is looking to increase its growth rate to a mid-single-digit annual rate by making strategic investments. At the same time, GE HealthCare is embarking on a long march to grow adjusted earnings before interest and taxation (EBIT) margin to the high teens to 20% from just 14.5% in 2022.

A patient entering a scanner.

Image source: Getty Images.

To get there, management plans to carry on introducing new products (which tend to carry higher margins) while making the most of its product portfolio by targeting low single-digit price increases and more product platforming. The latter refers to developing a collection of products operating off a common platform.

Alongside this, the company is investing in growth (at the expense of near-term margins) by investing in AI companies, and it has a long-term opportunity to grow its theranostics-based sales. As previously discussed, the company manufactures both the imaging system and diagnostic agents used in theranostics – using agents to diagnose and deliver drugs to affected areas. 

It's a technology that received a boost recently with the approval of a drug to reduce beta-amyloid plaques in Alzheimer's sufferers.

On top of these revenue and margin drivers, the company can grow margins due to easing supply chain pressures and raw material cost increases that have dogged the economy in recent years. Trading on slightly more than 18 times estimated 2023 earnings, and with excellent revenue growth and margin expansion prospects, the company represents a rare value in the healthcare sector. 

2. Johnson Controls and net zero emissions 

Whether you agree or disagree with the drive toward net zero emissions, the reality is the corporate world is adopting net zero commitments, and governments are adopting regulations in their favor. According to the International Energy Agency, buildings and construction account for 36% of final energy use and 39% of carbon dioxide emissions. 

That's where Johnson Controls comes in. The company manufactures and services heating, ventilation, air conditioning (HVAC), building controls, refrigeration, and fire & security products and equipment. As such, its products and technology help improve building efficiency, ensure health and safety, and reduce emissions. A long-term retrofit cycle drives the company's end demand as building owners seek to provide healthier, cleaner buildings while optimizing efficiency and reducing emissions. 

In addition, its OpenBlue suite of connected solutions enhances the value-add of its solutions. For example, digitally connected sensors can generate data on vibration and air flows from its HVAC equipment, and building controls can measure building occupancy, air quality, and velocity, which is then analyzed to power applications that improve outcomes, including reducing emissions and improving air quality. 

I discussed the company recently in reviewing its recent third-quarter earnings. While the company downgraded its full-year sales expectations on the back of a slowdown in global product sales -- dealers are resetting their inventories now that equipment lead times are normalizing -- the company's order book remains in good shape, particularly in its services businesses as building owners increasingly adopt its digital solutions outlined above. 

Management believes the slowdown is temporary, and with the stock now trading on less than 17 times 2023 estimated earnings, it's a good idea to take advantage of the dip.

3. Allegion, locking in value

The security and access company (locks and access doors) stock rarely trades on an attractive valuation. Still, the recent share price fall has moved it into a range many investors will feel comfortable buying in. 

The company is attractive because it's an investment in the increasing convergence of mechanical and electronic technology in security products. Based on 2022 figures, Allegion generates 75% of sales from mechanical products and only 25% from electronics. As such, there's a growth opportunity from the increasing adoption of digitally connected electronic locks and doors. 

Compared with traditional mechanical locks, electronic and digitally connected locks offer significantly more benefits, such as remotely monitoring and controlling access to locks and areas in a facility. They are more convenient (no need for bulky keys), can be remotely controlled and customized, integrated with smart technology systems (including those offered by Johnson Controls above), and even provide an electronic trail to monitor who accessed what areas at what time -- helpful information to improve security and reduce crime. 

Trading on slightly more than 16 times estimated 2023 earnings, Allegion is an excellent value for a company with good secular growth prospects.