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.

September 19, 2011 - Illinois Tool Works Inc. (ITW-NYSE) manufactures a range of industrial products and equipment worldwide. The company's Transportation segment offers metal and plastic components, fasteners, and assemblies; fluids and polymers; fillers and putties; polyester coatings, and patch and repair products; and truck remanufacturing, and related parts and service.

Power Systems & Electronics offers arc welding equipment; metal arc welding consumables and related accessories; metal solder materials; equipment and services for microelectronics assembly; electronic components and component packaging; and airport ground support equipment.

Food Equipment provides warewashing, cooking, refrigeration, and food processing equipment; and kitchen exhaust, ventilation, and pollution control systems; and food equipment service, maintenance, and repair.

The Construction Products segment offers anchors, fasteners, and related fastening tools; metal plate truss components, and related equipment and software; and packaged hardware and other products for retail.

Polymers & Fluids provides adhesives; chemical fluids; epoxy and resin-based coating products; hand wipes and cleaners; and pressure-sensitive adhesives and components. The Decorative Surfaces segment offers laminate for furniture, office and retail space, and countertops; and laminate flooring and worktops. In addition, it offers plastic reclosable packages and bags, and consumables; swabs, wipes, and mats; foil and film products; product coding and marking, paint spray, and static and contamination control equipment; and conveyor systems. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.

ITW is nothing if not diversified. It has about 850 business units in 57 countries. Foreign sales were 58% of 2010 revenues. Total sales were $15.87 billion. This year, 14 analysts have a consensus estimate for revenues of $17.93 billion (up 12.9%) for this year, then see $19.56 billion (up 9.1%) for 2012.

Second quarter results reflect the positive trend in sales and earnings. Earnings per share (EPS) were up 22% to 96 cents, though consensus estimate was for $1.02. (In the first quarter, EPS were 88 cents, 4 cents ahead of estimates.) Sales in the second period gained 17% to $4.615 billion. Better results came from organic growth in existing businesses, new acquisitions, and favorable currency rates. 16 analysts have a consensus estimate for the third quarter of 98 cents a share, well above the 83 cents of last year's third period. For the final quarter, they forecast 92 cents vs 79 cents last year in the fourth period.

Certain divisions are seeing strong demand, domestically and abroad, ones like the welding group (up18.2% in the June quarter) that services the heavy equipment manufacturers, and Industrial Packaging, which reported an increase of 20.9% in sales. Look for higher top line growth in Japan in the second half as its automotive and heavy equipment industries begin to rebuild after the earthquake/tsunami disaster earlier this year.

Lately, this quality stock has been hit, as investors moved more into a fear mode, pushed by economic data that suggests the general economy is losing steam. ITW is closely tied to the economic cycles but weathers them better than most because of its strong diversification, both in sales and geography. With the price pullback, it may be a good time to carefully consider adding this blue chip, but only after a full investigation as to whether it fits an investor's risk profile.

Essential numbers:
- Trailing P/E: 11.75
- Forward P/E: 10.30
- Price to sales ratio: 1.30
- Price to book: 2.14
- Operating margin (last 12 months): 14.98%
- Profit margin: 11.07%
- Return on equity: 19.80%
- Return on assets: 9.41%
- Total cash: $1.23 billion
- Total cash per share: $2.50
- Total debt: $4.07 billion
- Total debt to equity: 39.08%
- Book value per share: $21.18
- Total Outstanding shares: 491.41 million
- Float: 456.85 million
- Insiders own: .69%
- Institutions have 80.10% of the Float
- Dividend: $1.44
- Yield: 3.2%

Conservative investors will like a lot of what they see in ITW from the large cash position to a low P/E to the decent dividend. As icing on the cake, its Financial Strength is A++. The only concern is beyond ITW's control: global economic recovery. If that slows much more, the current pullback in the stock price will likely continue for a while. But if data start showing a recovery, especially in the larger, developed countries, expect the price to rebound.

- Company Web site: www.itwinc.com

  Ted Allrich