There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

January 25, 2010 - Cooper Industries, Ltd. (CBE-NYSE) engages in the manufacture and sale of electrical products and tools in the United States and internationally. The company operates in two segments, Electrical Products and Tools.

It also offers distribution switchgear, transformers, transformer terminations and accessories, capacitors, voltage regulators, surge arresters, and other related power systems components for use by utilities and for electrical power transmission and distribution.

The Tools segment manufactures, markets, and sells hand tools for industrial, construction, electronics, and consumer markets; automated assembly systems for industrial markets; and electric and pneumatic industrial power tools, and related electronics and software control and monitoring systems for general industry, primarily automotive and aerospace manufacturers.

The company sells through distributors, wholesalers, and agents, as well as directly to original equipment manufacturers, home centers, specialty stores, department stores, mass merchandisers, and hardware outlets. Cooper Industries was founded in 1833 and is based in Houston, Texas.

Cooper was hit on all fronts by the recession: the residential construction slowdown, the commercial construction halt, and the auto manufacturing decline. Earnings, which grew from $2.59 in 2006 to $3.59 in 2008, appear to be $2.42 for 2009. Analysts see $2.72 in 2010. Things should get better.

Part of the reason for investor optimism (the stock hit $18.86 on March 6, 2009, then bounced back to $44.99 by December 4, 2009) is the company's success in paring back the business to reflect current economic realities. For over a year, the company has been paying off debt, cleaning up its balance sheet. Currently, debt is only 24% of capital, and its Financial Strength is A from Value Line. Cash is up to $662 million. Cash reserves are higher by 155% compared to 2008. (There's a chance the company will buy back stock soon or increase the dividend.) Inventories have been trimmed and turnover has increased.

2009 was a difficult year for CBE as sales went from $6.521 billion in 2008 to analysts' estimate for 2009 of $5.125 billion. There was weak demand from almost all sectors CBE serves: industrial orders slowed due to low capacity utilization and commercial construction came to a standstill. As sales slowed, costs continued to rise and general administrative expenses increased. Margins were compressed. On the positive side: international sales improved. Demand stabilized in the Utility and Retail and Residential markets.

There's a dividend with the stock: $1.00. That's a 2.2% yield. Payment was made on January 3, ex-dividend date was November 25, 2009. Next payment will be three months from the January date. The dividend takes 40% of earnings to pay.

More numbers: P/E is 18. Average annual P/E has been in a range of 11 to 16.8 over the last 5 years. Price to sales is 1.40. Price to book is 2.6.
Operating margin for the last 12 months was 11.49% while Profit margin was 7.9%. Return on equity was 13.61%. Cash per share is $3.97. Total debt is $1.21 billion. Current ratio is 1.74. Book value is $17.21. Insiders own 11.27% of the stock while institutions have 69%.

If you think the eonomic recovery will gain traction, then CBE should be of interest. The only concern: the price of the stock. It's up over 100% in the last 9 months, and valuations are getting a little stretched. And this stock is volatile. A 1.74 beta tells investors it moves about 75% higher or lower than the market. Earnings should be better next year; a rebound seems close. But if the recovery stalls, so will CBE, and as earlier price declines showed, it can go down quite a way. A lower entry point, no matter how good the numbers and story look, is suggested.

- Company Web site: www.cooperindustries.com

- Ted Allrich