January 12, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of ITT (NYSE: ITT ) soared 20% in early trading Wednesday after it announced plans to split itself into three publically traded companies focused on aerospace and defense, water management, and industrial products.
So what: ITT investors had become increasingly worried over the profit headwinds from looming U.S. defense budget cuts, so the decision was made to separate ITT's defense segment from its more promising businesses. The breakup marks the end for ITT as a diversified conglomerate, with the new ITT continuing as an industrial-products company specializing in process and motion-control.
Now what: ITT is certainly worth following. Big buyouts and mergers usually steal all of the headlines, but corporate spinoffs -- in which divisions are set free from bureaucratic ties -- can usually add more long-term value. Of course, if you're a little turned off by today's surge in ITT shares, Sara Lee and Fortune Brands, both of which are also in the process of breaking up their businesses, might pique your special-situations interest.
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