I'm willing to bet that come what may in the economy, folks will still want clean drinking water. I'm also willing to bet that even if U.S. military activity has peaked for now, there's still plenty of interest in upgrading its electronic-warfare capabilities. Add a few other businesses into the mix with relatively evergreen demand, and ITT Industries
The second-quarter report from this fluid-handling, defense, motion/flow control, and electronic-component concern certainly doesn't compare badly to what we've seen from other industrial conglomerates. Revenue rose 11% (10% in organic terms) and margins improved nicely as operating income rose 14%. Revenue growth was up across the board, though strongest in the defense category.
As I said only last week, the notion of "defensive" investing can be treacherous. Is a food stock like Kellogg
In the case of ITT, though, you could credibly argue that much of this business should hold up even in tougher times. More than one-quarter of the company's business revolves around water and wastewater handling and treatment, and the combination of population growth and aging infrastructure makes it hard for me to believe that spending will drop noticeably in this market. Likewise with defense -- defense budgets are notoriously volatile, but I'd be willing to bet on ongoing spending on electronics and communication, which is good for companies like ITT and L-3
That doesn't mean that ITT is a perfect stock. The return on capital is lower than I'd like, and returns have never been all that high. And while ITT might be more stable and/or better-suited to weather tougher economic times, I wouldn't automatically rank it much higher than companies like Danaher
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).