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.

October 27, 2008 - W.W. Grainger, Inc. (GWW-NYSE) supplies facilities maintenance and other-related products in North America. It operates in three segments: Grainger Branch-based, Acklands' Grainger Branch-based (Acklands' Grainger), and Lab Safety Supply, Inc. (Lab Safety). The Grainger Branch-based segment provides product solutions for facility maintenance and other products through local branches, catalogs, and the Internet in the United States, Mexico, and China. This segment also distributes material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, and cleaning and maintenance supplies to small and medium-sized businesses, to large corporations, governmental entities, and other institutions.

The Lab Safety segment markets safety and industrial products in the United States and Canada. The company offers its products through a network of branches, sales representatives, call centers, catalogs and other direct marketing media, and the Internet. As of December 31, 2007, it operated a network of 610 branches, 18 distribution centers, and various Web sites. W.W. Grainger, Inc. was founded in 1927 and is based in Lake Forest, Illinois.

This stock has been hit hard in the last couple of weeks, just like the rest of the market. Sure, the economy is slowing and that will no doubt decrease earnings going forward. The question is how much? Management has done a great job in the last 5 years, pushing earnings from $2.46 in 2003 to $4.94 in 2007 with an annual average growth rate of 19%. Analysts predict earnings will grow at 12.8% a year, on average, over the next 5. This year, analysts see a per share net of $6.11 (consensus from 10 analysts) and next year, $6.28.

Grainger has been expanding its products line as well as its markets. In the catalog for 2009, the company shows 35,000 products. It's also buying more businesses as the recent 49.9% stake in Asia Pacific Brands India for $5.4 million shows. That increases GWW's presence in the Far East.

There is a legal investigation by the Department of Justice into GWW. Management is meeting with authorities about an allegation of overcharging government customers for certain supplies. Legal charges cost the company 5 cents in earnings in the second quarter, and since this is ongoing, expect more charges from it.

The company is buying back stock, about 9.3 million shares in the last year. Along with relatively flat operating expenses, lower interest costs, thanks to a new loan, and higher revenues, expect better margins going forward. Helping with margins are newly signed agreements with product and transportation suppliers which lower the increase in prices for raw materials and transport. Furthermore, the company has been successful in making some price hikes stick on its products.

Some numbers: Forward P/E is 11.6. The average annual P/E for the stock in the last 15 years has ranged between 16.17 and 20.5. Price to Sales is .86. Price to Book is 2.78. Profit margin for the last 12 months was 6.87% with Operating margin at 11.20%. Return on Equity was 22.95% in the last year. Revnues were $6.87 billion in the 12 months. There's $364.42 million in cash with $4.79 a share in cash. Total debt to equity is .247. Current ratio is 2.955. Book Value per share is $27.97. There's a dividend of $1.60 for a yield of 2%.

W.W. Grainger has proven to be an earnings machine, well managed and fiscally sound. Conservative investors should find this one of interest as it has great diversification, both in products and global sales. Value Line rates the stock an A++ for Financial Strength.

- Company Web site: www.grainger.com

- Ted Allrich