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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

The Sharpest Tool in the Shed by Christopher C. Williams

Summary: Investors are betting a worldwide infrastructure boom will boost shares of heavy-equipment makers. One company, Illinois Tool Works (NYSE:ITW), which makes a "dizzying array of products for the automotive, construction and food and beverage industries," has received accolades from industry insiders and analysts. Morningstar called it "one of the sharpest tools in the shed"; Goldman Sachs says, "it's exceptionally attractive"; and Bernstein Research says it "has and will continue to grow with the global economy." At 15x 2008 earnings, it trades at a 10% discount to similar companies; Goldman Sachs analyst Deane Dray contends it deserves a 10% premium. CEO David Speer is a master of acquisitions; he identifies and improves very small companies (last year he bought 53). ITW's corporate structure is "ultra-lean"; managers are adept at focusing resources on their biggest and most profitable clients. Investors need not worry about U.S. housing and auto slowdowns -- the markets account for just 13% of its revenues, and some of its other lines like renovation equipment run counter-cyclical to the trouble spots. Barron's says "the company's continued success could push the shares up to 67-68 in the next year, for a prospective gain of about 23%."

Related Links: Illinois Tool Works: Why a Private Equity Buyout Doesn't Make SenseIllinois Tool: A Boring Stock With A Great Long-Term Track RecordIllinois Tool Works: Five Years Of Double Digit Growth

Illinois Tool Works 08 07 2007

Source: Illinois Tool Works: This Company Deserves a 10% Premium, Not Discount - Barron's