Datalogic Leveraging Its Product ID Know-How Into Larger, Faster-Growing Markets

Automation takes many forms, and product ID is arguably an under-appreciated part of the automation story. Italy's Datalogic SPA (OTC:DLGCF) (DAL.MI) is leveraging a strong foundation in retail data capture (scanners in particular) into new areas and gaining share in markets like manufacturing, logistics, and healthcare as more businesses turn to advanced identification technologies to improve production flows, improve accuracy/reduce errors, and lower overall operating costs.

Datalogic's ADRs are not especially liquid, but these shares are nevertheless worth a look as companies like Honeywell (HON) bring a higher profile to the opportunities to automate in areas like warehouses and logistics. With fragmented competition in the manufacturing and logistics spaces, I believe Datalogic could generate long-term revenue growth in the high single-digits with improving margins and perhaps attract the attention of larger players looking to bring more technology to factory floors and warehouses.

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Datalogic Leveraging Its Product ID Know-How Into Larger, Faster-Growing Markets

Honeywell Looking At Improving Markets And Strategic Options In 2018

I don’t exactly think that Honeywell (HON) is undervalued right now, but it is probably about as close to undervalued as I’m going to find in the large-cap multi-industrial space, or at least outside those stories that need significant self-improvement. With good growth in safety and productivity, ongoing growth in chemicals, a recovery in process automation, and improving conditions in aerospace, 2018 should be a pretty good year for Honeywell. What’s more, the company’s upcoming spin-offs should improve the overall long-term growth outlook and Honeywell has more than enough liquidity to make a significant strategic acquisition or two. Like I said, this stock is not cheap, but the implied return is a little more palatable than for many of its peers.

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Honeywell Looking At Improving Markets And Strategic Options In 2018

At Cognex, The Electric Eye Is Green

If you love growth, you may well like Cognex (NASDAQ:CGNX). If you like growth at a reasonable valuation, this will be a more frustrating story for you. Cognex has established itself as a high-quality leader in the machine vision and product ID space, and high-quality companies deserve premiums, but the Street seems to be baking in an exceptional amount of growth into today's valuation.

I love the prospects for Cognex to introduce new products to expand its expecting opportunities, as well as its opportunities to leverage growth in areas like factory and warehouse automation, and I have little to complain about with respect to how management runs the business. If and when we get another of those market corrections that sweeps many babies out with the bathwater, this would definitely be a name to revisit.

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At Cognex, The Electric Eye Is Green