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.

December 22, 2008 - Illinois Tool Works Inc. (ITW-NYSE) manufactures a range of industrial products and equipment. It offers industrial packaging products, including steel and plastic strapping, plastic stretch film and related equipment, paper and plastic products that protect goods in transit, and metal jacketing and other insulation products; power systems and electronics, such as arc welding equipment, metal arc welding consumables and related accessories, metal solder materials for PC board fabrication, equipment and services for microelectronics assembly, electronic components and component packaging, and airport ground support equipment; and components and assemblies for automobiles and trucks, fasteners, fluids and polymers for maintenance and appearance, fillers and putties for auto body repair, and polyester coatings and patch and repair products for the marine industry.

In addition, Illinois Tool Works offers plastic reclosable packages and bags, consumables, plastic and metal fasteners and components, equipment and related software for testing of materials and structures, software and related services for industrial and health care applications, foil and film used to decorate consumer products, product coding and marking equipment, paint spray equipment, and static and contamination control equipment, as well as swabs, wipes, and mats for clean room usage. The company was founded in1912 and is based in Glenview, Illinois.

The major premise for considering ITW is an interest in manufacturing and a belief that it will revive in the near future. Though well diversified (it has over 825 buisness units in 52 countries), revenues depend siginificantly on manufacturing. If your outlook is negative on the global economy for a prolonged period, then ITW won't appeal.

However, if you don't know how long the economic malaise will last, or you think it will end soon, then ITW should be of interest. Not only does it pay a decent dividend while you wait for a recovery (3.7%), it has one of the strongest balance sheets in its industry (debt is 13% of capital).

Earnings were down this year, with estimates for 2008 at $3.06, from $3.36 last year. It's the first down year for earnings since 2001. In 2009, the analysts' average estimate is for $2.48 (the range is from $2.05 to $3.25). The global economic slowdown is showing up in the lower earnings. They also reflect the discontuance of Decorative Surfaces which contributed about $1.2 billion in annual sales.

The company saw transportation sales down 9.6% in the third quarter, mostly from the Detroit automakers. The Construction Products group was also hit, feeling the weakness in residential building. As long as credit is tight, this division isn't going to see increases in sales. However, with the Decorative Surfaces unit sold, the company has less exposure to the housing market.

The positive side of the economic downturn is the opportunities to acquire other companies at attractive valuations. ITW has already spent its budget to acquire $1 billion in revenues this year and will most likely get to $1.5 billion by the end of it. It's also buying back stock which should beef up earnings per share. As the stock price has dropped sharply this year, the company has acclerated its repurchase program.

More numbers: Trailing P/E is 10 while the Forward P/E is 13.5. Price to Sales ratio is .98. Price to Book is 1.88. Operating margin for the last 12 months was 15.63% and Profit margin was 10.09%. Return on Equity was 20.21%. There's cash of $867.62 million. Total debt is $3.6 billion. Total Debt to Equity is .395. The Current Ratio is 1.39. There are 511.16 million shares outstanding with a float of 504.28 million. Insiders own 1.04% of the stock while institutions have 82.3%. The annual dividend is $1.24, giving a yield of 3.7%. Value Line rates its Financial Strength at A++.

As mentioned above, if you are somewhat bullish on the manufacturing sector, then ITW should be of interest. There doesn't seem to be a good reason to be bulllish at this time, but it may be that the worst is over and that recovery is imminent. Once recovery does begin, look for ITW to show strong improvement as it reflects the manufacturing sector as well as any stock can.

Company Web site: www.itwinc.com

- Ted Allrich