united technologies
New York symbol UTX, has five main businesses: Carrier makes heating and air conditioning equipment; Otis makes and services elevators; Pratt & Whitney makes aircraft engines; Flight Systems makes helicopters and aircraft controls; and UTC Fire & Security provides security and fire protection services.
United Technologies serves the aerospace and construction industries. These are highly cyclical businesses, and fears of a long recession caused the stock to fall 54.7%, from $82.50 in 2007 to $37.40 in March 2009. Since then, the stock has regained a third of this drop. We feel United Technologies has more gains ahead. That’s largely because all of its companies are market leaders with strong brands and loyal customers. As well, a new restructuring plan puts the company in a good position to rapidly increase its earnings when the economy begins to recover. UNITED TECHNOLOGIES CORP. $51 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 942 million; Market cap: $48 billion; Price-to-sales ratio: 0.9; WSSF Rating: Above Average) has six main businesses: Carrier makes heating and air-conditioning equipment (25% of 2008 revenue, 17% of profit); Otis makes and services elevators (22%, 32%); Pratt & Whitney makes aircraft engines (22%, 27%); Hamilton Sundstrand makes electronic controls for aircraft (11%, 13%); UTC Fire & Security sells burglar alarms and fire-protection services (11%, 6%); and Sikorsky makes helicopters (9%, 5%). The U.S. government is United Technologies’ biggest customer, and accounts for about 13% of its yearly revenue....
UNITED TECHNOLOGIES CORP. $51 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 942 million; Market cap: $48 billion; Price-to-sales ratio: 0.9; WSSF Rating: Above Average) has six main businesses: Carrier makes heating and air-conditioning equipment (25% of 2008 revenue, 17% of profit); Otis makes and services elevators (22%, 32%); Pratt & Whitney makes aircraft engines (22%, 27%); Hamilton Sundstrand makes electronic controls for aircraft (11%, 13%); UTC Fire & Security sells burglar alarms and fire-protection services (11%, 6%); and Sikorsky makes helicopters (9%, 5%). The U.S. government is United Technologies’ biggest customer, and accounts for about 13% of its yearly revenue. We feel that United Technologies’ diversification is one of its major strengths. All of its businesses are leaders in their industries. Plus, the company sells products to both original-equipment manufacturers and aftermarket customers. That cuts its risk. For example, when demand for new planes is weak, airlines will probably buy more replacement parts instead of new aircraft. When the economy improves, aircraft makers will order more new engines and electronics. This will offset lower sales of spare parts....
We still think high-quality mutual funds with a long-term focus will beat stock-market indexes over time. If funds invest as we advise — sticking with well-established companies and spreading their assets across the five main economic sectors — they will likely lose a lot less than the indexes during a significant market downturn. That’s because big market slides are particularly hard on the stocks that were the most popular during the preceding rise, and our approach avoids excessive investment in these companies. In contrast, index funds do tend to load up on the hottest, most popular stocks as they rise. That’s because these stocks make up a growing proportion of the index as they increase in value. The most recent example is Potash Corporation of Saskatchewan, which, propelled by soaring fertilizer prices, had the highest market capitalization on the Toronto exchange last June. The shares have since dropped 54%....
DIAMONDS TRUST SHARES $85.20 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. The fund’s top 10 holdings are: IBM, Exxon Mobil, Chevron Corp., 3M, Procter & Gamble, McDonald’s Corp., Johnson & Johnson, Wal-Mart Stores, United Technologies and Coca-Cola. The fund’s expenses are about 0.17% of its assets. Diamonds Trust Shares are a buy.
UNITED TECHNOLOGIES CORP., $40.57, New York symbol UTX, plans to cut 5% of its workforce because of slowing demand for its Pratt & Whitney jet engines and Hamilton Sundstrand aerospace equipment. United Technologies sells its products and services in the construction and aerospace industries. Along with Pratt & Whitney and Hamilton Sundstrand, it sells Carrier heating and air conditioning units and Otis elevators, among other products. Weakness in the construction industry has hurt sales at Carrier and Otis. United Technologies’ management believes the company’s 2009 revenue will fall about $2.7 billion (or 5%) short of its original forecast of $57 billion....
STATE STREET CORP., $19.40, New York symbol STT, fell 50% this week after it disclosed higher-than-expected potential losses on its $79-billion investment portfolio. As of December 31, 2008, it had unrealized losses of $5.5 billion (after tax), up 66.7% from $3.3 billion at the end of the third quarter. State Street faces more losses from off-balance-sheet “conduits,” which trade securities backed by mortgages, credit card receivables and other loans. The company does not own conduit assets, but has agreements to provide them with backup loans. State Street believes the credit quality of these securities remains high, and that investors will receive full value when they mature, but a sharp drop in demand for all asset-backed securities has hurt their current market value. As a consequence, these conduits now have unrealized losses of $3.6 billion. Accounting rules may force State Street to bring these conduit assets onto its balance sheet at their currently depressed value. This could, in turn, force the company to issue new common or preferred shares in order to cover these losses and strengthen its balance sheet. Current market...
DIAMONDS TRUST SHARES $86.04 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. Currently, the fund’s top 10 holdings are IBM, Exxon Mobil, Chevron Corp., 3M, Procter & Gamble, McDonald’s Corp., Johnson & Johnson, Wal-Mart Stores, United Technologies and Coca- Cola. Expenses are about 0.18% of assets. Diamonds Trust Shares are a buy.
We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan, which had the highest market cap on the Toronto exchange in June, 2008, on the strength of soaring fertilizer and agriculture prices. The shares have since dropped 70%....
DIEBOLD INC. $33 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.8 million; Market cap: $2.2 billion; WSSF Rating: Average) is currently restating its financial statements to adjust for a change in the way it recognized revenue from certain sales of automated teller machines (ATMs). The company now aims to soon file its updated results for 2007 and the first two quarters of 2008. The stock continues to trade below the $40.00-a-share takeover offer from UNITED TECHNOLOGIES CORP. $60 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 964.4 million; Market cap: $57.9 billion; WSSF Rating: Above average). Diebold has rejected the offer as too low, but its accounting problems make it difficult for United Technologies to increase its offer. Diebold continues to win new ATM orders, and bringing its financial statements up to date will cut its risk. However, further delays could prompt United Technologies to drop its takeover bid. That could hurt Diebold’s stock price....
Despite a stream of nerve-rattling financial news, starting with the failure of the first Congressional bailout package, the Dow Industrials and the S&P 500 managed to hold above Monday’s lows this week until just before Friday’s close. It’s a mistake to read too much into this, of course. But it is encouraging to see both indexes move sideways in this depressing news environment. Market turnarounds often occur in times of high volatility and bad news. Our advice is to resist any urge you may feel to sell good-quality stocks, just because you fear they may go lower. WACHOVIA CORP. $6.21, New York symbol WB, has agreed to merge with WELLS FARGO & CO. $34.56, New York symbol WFC. Wachovia stockholders will receive 0.1991 of a Wells Fargo common share for each Wachovia share they hold. The deal requires stockholder and regulatory approvals....