Illinois Tool Works (ITW)

If you’re new to investing, don’t be afraid of companies that sound boring. It’s easy to get caught up in looking for the next Google or Apple, but sometimes boring companies are great investments.
A perfect example is Illinois Tool Works (ITW). Man, I love that name! In my book, the name alone is worth 15 on the p/e. I guarantee you, you’ll never hear someone say, “Keep your eyes on them, they could be the next Illinois Tool Works.”
Here’s some 411. ITW is a diversified manufacturer based in…well, Illinois. The company has delivered double-digit earnings growth for 10 straight years. Not many companies can say that. Plus, it looks to do it again this year. Today, ITW reported Q3 EPS growth of 13% and it sees Q4 EPS coming in at 86 to 90 cents, which translates to growth of 11% to 16%. (Wow, even their financials are dull.)
What they do extremely well is buy dozens of small companies that they then fold into the larger ITW universe. The management team has done a remarkable job of pinpointing small businesses. High ROE, solid margins, strong cash flow. In the last 30 years, the shares are up nearly 100-fold, and that doesn’t include dividends that have steadily grown each year.

Posted by on October 17th, 2007 at 1:07 pm


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