Stock Thoughts: Ingersoll-Rand
June 2nd, 2008 by Grant in: Investing, Stock Research, Stock ThoughtsSeveral days ago I asked my buddy MJ over at Dyslexic Research what he thought of Ingersoll-Rand (IR: chart, web, Y!). I’m not really an industrials guy, as my area of knowledge rests more in energy (specifically oil and gas) and tech. That said, I’ve been making efforts to broaden my knowledge and diversify my portfolio.
MJ, however, is very much in tune with industrial sector, and I figured he’d have a good opinion on the company.
So it was with great interest that I read his opinion post on the company.
As MJ mentions, Ingersoll-Rand is in early stages of acquiring Trane (TT: chart, web, Y!). You know, the air conditioner people. But it turns out that Trane is much larger than I thought, and offer product lines outside of the home HVAC units.
MJ believes that Trane is a stronger company than Ingersoll, and as such, Ingersoll benefits more from the acquisition than Trane does (which is good if you’re looking at Ingersoll stock). However, he also suggests that this would be a great opportunity for Ingersoll to screw up a fairly healthy company. And I agree.
I’m not sure I agree with Ingersoll’s sell off of Bobcat, as that seemed to be a very robust product and a fairly bullet-proof brand. Trane could bring some street-cred back to IR, but it will take some time according to MJ:
After seeing mergers from the inside out, it will take roughly six months to a year for the two companies to properly integrate into one another and see potential synergy savings. After that both companies might be able to flourish. -Source
In my opinion, a lot will depend on how they structure the acquisition. If Trane operates as a subsidiary, I think the integration process will be fairly smooth, as it will be a matter of book keeping. However, if it is a merger in the truest sense of the word, I’d look at 18 months before you see signs of a single, well oiled machine.
I’ll let you read about MJ’s outlook on Ingersoll and his official opinion on the stock at his blog, and he’s brought up some very valid concerns.
For now, I’ll keep digging but will keep Ingersoll-Rand on my watch list.
Tags: Ingersoll-Rand | IR | Stock Thoughts | Trane | TT
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June 4th, 2008 at 2:17 pm
I really didn’t comment on the Bobcat sell-off, but I don’t neccessarily think that it was a bad idea. Bobcat sees serious competition from Deere, Caterpillar, GEHL, and more for their famous skid-steers and the rest of their product line for that matter. Each of the other companies offers a complete line of products on up to Bulldozers and Backhoes. Bobcat is now incorporated into Doosan which is like a Korean Caterpillar and should help it better compete.
All that being said IR was Bobcat and it is pretty interesting for them to go a completely different direction. I understand the push for a consistent return of income rather than a cyclical market, but HVAC’s and skid-steers are completely different. It’s like an oil man selling off the wells to go into the water treatment business, it’s similar but really not the same. If they leave Trane somewhat intact while trimming the fat in appropriate areas, it could be very profitable. Eventhough Buffet likes it, for now I will wait and see.
Don’t forget Grant, I want to see your thoughts on Petrobras (PZE), Ken Heebner from the latest Fortune feature article seems to think it is going to take off. Otherwise, thanks for the props.