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Strategies & Market Trends : Value Investing

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To: Jurgis Bekepuris who wrote (38760)	8/11/2010 12:42:58 AM
From: Spekulatius	Read Replies (1) of 78748

re ITT, I have been watching this one for a while and decided that today's price is a good entry point, although I could argue that it's truly cheap. PE is around 11 but considering that 60% of their earnings are related to defense and government business that may not be that cheap. Defense peers for example trade at 9x PE so if I back this out, I would get a PE of around 14 for the industrial part. For a variety of reasons, i think that ITT defense business, which is heavily into infrared optics and electronics 9often weapon system upgrades), is superior to let's say GD's or LMT big program focus. Management has done a good job running this business. the defense part has been providing most of the growth but that is stalling so they want to go from a 60%/40% Defense/industrial to 40%/60% by 2014. This makes sense to me but will probably depress growth in EPS somewhat since acquisitions in the industrial sector don't come cheap (see the last 2 pump company purchases). I believe the sale for CAS is a step in that direction.

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