A spin-off, the separation of a business unit into its own publicly traded company, brought Honeywell's aerospace division to market independently in June 2026. The new entity, Honeywell Aerospace Inc. (NASDAQ: HONA), makes aircraft components, avionics, engines, and systems. Investment advisor Madison Investments named it a new holding for its Madison Large Cap Fund in the fund's second-quarter 2026 investor letter.
Here is what that means in practice. Honeywell Aerospace products appear on roughly 90% of commercial aircraft currently in service, according to the fund's letter. That installed base creates a steady flow of maintenance and replacement business on top of whatever new programs the company wins. Its customers include aircraft manufacturers, government buyers, and airline operators.
The Madison thesis is direct. When a conglomerate like Honeywell International separates a unit, management at the new company can direct compensation and capital allocation entirely toward aerospace, rather than balancing those decisions against unrelated businesses. Madison's letter states that the combination of an attractive growth outlook, better-aligned management incentives, and more targeted capital allocation is underappreciated by the broader market.
What the numbers actually say
On August 21, 2026, HONA closed at $164.73 per share, placing its market capitalization at $52.21 billion. The one-month return at that date was -21.87%, a steep decline from wherever the stock priced around the June separation. Madison's letter does not supply the opening price, so the precise starting point for that slide is not available from this source.
Madison's own fund returned 8.4% in the second quarter of 2026, for Class I shares, against a 15.2% gain in the S&P 500 over the same period. The fund attributes the index's outperformance primarily to a narrow cluster of artificial intelligence stocks, and its letter compares the current AI enthusiasm to the late-1990s internet bubble, with Madison noting that today's market leaders may not hold that position through a full cycle.
The fund also cited broader pressures it expects to weigh on markets: a volatile federal policy environment, growing budget deficits, inflation, high interest rates, and strained consumer finances. Those are Madison's stated concerns, not independent forecasts, and they inform the fund's focus on companies it views as structurally undervalued.
What the spin-off thesis depends on is whether management executes on the capital allocation and incentive changes Madison described. The stock's -21.87% one-month slide through August 21 suggests the market has not yet reached the same conclusion.