Value Investing
Establishing position in Illinois Tool Works (ITW)
As mentioned in my previous article, I am establishing a position in Illinois Tool Works (ITW). illinois Tool Works appears on the magic formula screen for the top 100 companies with a minimum market cap of 2000 million.
Normally I stick to companies in the top 25 results but had some time to browse the top 50 and top 100 and came accross Illinois Tool Works (ITW).
The Business According to Yahoo Finance Profile:
Illinois Tool Works, Inc. manufactures a range of industrial products and equipment. It offers industrial packaging products, including steel and plastic strapping, plastic stretch film and related equipment, paper and plastic products that protect goods in transit, and metal jacketing and other insulation products; power systems and electronics, such as arc welding equipment, metal arc welding consumables and related accessories, metal solder materials for PC board fabrication, equipment and services for microelectronics assembly, electronic components and component packaging, and airport ground support equipment; and components and assemblies for automobiles and trucks, fasteners, fluids and polymers for maintenance and appearance, fillers and putties for auto body repair, and polyester coatings and patch and repair products for the marine industry. The company was founded in 1912 and is based in Glenview, Illinois.
Commentary
A pretty consistent company selling near its 52 week low. The company currently sports a pre-tax earnings yield of 10%. Not exactly spectacular but meets my minimum requirement. Over the past 10 years, ITW has averaged ROE% above 15%, currently at about 18-19%, and ROA of 11%. Until recently, its P/E has averaged north of 20, but currently sports a P/E of 14 and a forward P/E of 11. I am not expecting spectacular returns from ITW, but would not be surprised if it performs very well as management appears to have its heads on it shoulders.
Disclosure: I have a buy order for ITW which should be filled tomorrow
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Tags: Discussion
5 comments for “Establishing position in Illinois Tool Works (ITW)”
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Is petrol derivatives raw materials for ITW thus increasing their cost?
Is increase in price for gasoline that is driving ITW stock price down?
Just trying to figure out what is driving the stock down,
The stock started to trend lower when management guided lower for the year which were below analysts expectations.
My guess is that, like most industrials, it is selling off due to economic slowdown concerns.
Also do not forget the fact that ITW has been consistently increasing its dividends for the past 44 years.
Annual dividend payments have increased over the past 10 years by an average of 15.70% annually, which is much higher than the growth in EPS. A 16% growth in dividends translates into the dividend payment doubling almost every four and a half years. If we look at historical data, going as far back as 1987, ITW has actually managed to double its dividend payment every five years on average.
I forgot to mention Dividend Gorwth Investor’s Analysis on Illinois Tool Works. The analysis can be seen at…
http://dividendgrowth.blogspot.com/2008/06/illinois-tool-works-itw-dividend.htm