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New Position: ITT Corporation

September 1, 2011

Sorry, I’m a bit delayed in reporting this. I could blame hurricane Irene, or I could just admit I’ve been lax. Take your pick. I’ve added an initial position of ITT Corporation shares. Its a classic spinoff situation and August provided a chance to get in to the position at the pre-announcement share price.

I’ll be providing a more detailed analysis anon.


From → Positions Closed

  1. Des permalink


    ITT was in my sights too, but more as a post-spinoff play rather than pre-spinoff. Then I came across your post, which made me rethink. And then I came across this other post on frogskiss which made me realize perhaps I was rethinking too much.

    Any comments?

    It does seem to me that it’s better to wait for shareholders to dump the ugliest child post-Nov distribution, and pick it up.

    • Des,

      I meant to post about ITT, then read Andrew’s analysis on the Frog’s Kiss and kind of forgot about it because he did alot of the legwork and analysis. There really wasn’t too much to add…EXCEPT that I don’t quite agree with his investment conclusion because I think he is leaving out one big qualitative factor: INCENTIVES. The businesses may look near fully valued, but I think that when the management incentives created with the spinoff are activated (it might take a year or two to play out) we could see some suprising things. Expenses cut, revenues juiced (and I don’t mean accounting gimmicks) etc. Maybe Andrew is right that this is all just a dance to dress up the ITT stub company to find a suitor. Somehow, I don’t think so; Its an awful lot of work to do a spin off (I know, I was involved in one) just to dress up one division for sale.

      As to waiting for the spin-off to happen and picking up the ugly duckling, I’m not really sure that’s the way to go. I don’t see institutions blindly dumping any of the three post-split companies because of share price, capitaliztion or even line of business. This is the usual way that we small investors get a ‘discount’. I could be wrong however. That said, I don’t think I could pick a winner in this three horse race, so I’ve gone for the shotgun approach.

      I see that Michael Price took a significant position in ITT after the spin-off announcement, so he, too, opted for the shotgun approach. And what’s more, he bought in at much higher prices that the shares are trading at today. Nice to be in that kind of company.

      Successful investing to you!


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