Honeywell Aerospace (HONA) Spin-Off Unlocks Standalone Value Amid Strong Market Outlook

Madison Investments, a U.S. investment advisor, reported its second-quarter 2026 performance for the Madison Large Cap Fund. In Q2, U.S. stock market indices saw their best performance since 2020, with a notable emphasis on AI-related stocks. The Madison Large Cap Fund (class I) achieved an 8.4% return in the quarter, trailing the S&P 500 Index's 15.2% increase.

The market's current narrowness, driven by AI, mirrors the late 1990s internet bubble. Historically, winners in such phases often face busts. The letter also cautions about the impact of a volatile federal administration, rising budget deficits, inflation, high interest rates, and strained consumer finances on the economy and stock market.

Among the fund's top five holdings, Madison Large Cap Fund highlighted Honeywell Aerospace Inc. (NASDAQ:HONA), spun off from Honeywell International in June 2026, as a new addition. As of August 21, 2026, Honeywell Aerospace Inc. had a market capitalization of $52.21 billion, with its stock closing at $164.73 per share. The company reported a one-month return of -21.87%.

Honeywell Aerospace Inc. caters to a broad array of aerospace programs, with approximately 90% of in-service aircraft today featuring its products. The separation from Honeywell International is anticipated to better align management compensation and capital allocation with the business's specific needs. Madison Large Cap Fund believes the company's growth outlook, improved incentives, and optimized capital allocation are underappreciated.

Notably, Honeywell Aerospace Inc. (NASDAQ:HONA) is not included in the fund's list of the 40 Most Popular Stocks Among Hedge Funds. While the fund acknowledges Honeywell Aerospace's potential, it suggests that certain AI stocks may offer greater upside potential and carry less downside risk.