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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (38764)	11/8/2011 9:52:53 AM
From: Spekulatius	Read Replies (3) of 78744

bought XLS @10.45$ - the defense part of ITT (after the spinoff). My rough notes say earnings/share (pro forma) around 1.6-1.7$/share, EV/EBITDA <5x including pension obligations. Dividend/share >0.4$. ITT's last earnings report showed better than expected results and order flow for the defense business. The defense stub obviously get's sold out from a lot of ITT shareholders, at least that is my take. While I don't like the prospects of defense too much, I think XLS is severely mispriced. First of all the valuation is below even the cheap prime contractors like NOG, LMT and LLL and second their prospects are better than average, due to focus on smaller programs that provide fairly good bang for the buck (infrared optics, upgrade programs) and ot field like Drones and cyber warfare. I also think that there is a good chance that they get taken out in the longer run after the 2 years period after the spinoff is expired (which make a merger more tax efficient). I had some shares bought before on it's first trading day after the spinoff at 10.25$ and bought more today in the AM.

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