Several 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.

Investing, Stock Research, Stock Thoughts Ingersoll-Rand, IR, Stock Thoughts, Trane, TT

I’ve been watching Schering-Plough (SGP: chart, web, Y!) since I started looking for my next buy-it and forget-it stock. The stock price has fallen considerably since then on news that a company study produced disappointing results on the effects of Vytorin, a next generation cholesterol drug.

They study showed that Vytorin had no benefit on the buildup of artery plaque over the older drug Zocor. The silver lining to this story that is easily glanced over is that Vytorin cut bad cholesterol 40% more than Zocor or Zetia (Vytorin is a combo pill of Zetia and Zocor).

Opportunity Knocks?

I view these situations as opportunities. Schering is a strong company, whose stock price is being affected by panic selling stimulated by an initial communication from the FDA concerning the results of this inter-company study.

The fact is, Schering isn’t relying on the success of Vytorin to keep the company afloat, just like Merck (MRK: chart, web, Y!) didn’t bet the farm on Vioxx (which they ended up with tens of thousands of liability claims).

Schering is sitting on a P/E of 14.8, which is fairly low for big-pharma players, and the stock price has been driven down by higher than average volume on the news. I suspect that a good portion of the money that’s fleeing the company stock belongs to institutional investors already gun shy about overall market health.

The downside to SGP is that it doesn’t have the return on revenue that other, bigger pharmaceutical players like Pfizer (PFE: chart, web, Y!), GlaxoSmithKline (GSK: chart, web, Y!) and Merck, sitting at just 10.6% compared to 22.8%, 23.2% and 19.8%, respectively.

Buy-it and Forget-it?

I’m still not sure this is a buy-it and forget-it stock. The financial health of the company is good, but there are others out there that are better. However, it may be prudent to take advantage of the stock price while it’s down. Once the whole Vytorin issue blows over, like the Vioxx debacle did, I think there is some considerable upside to the stock itself. After all, there is an inherent upside of nearly 70% if you consider the recent highs of $32 per share.

Schering Plough has been beaten down by over reaction to headlines and overall market sentiment. This could be the kind of opportunity you want to take advantage of in times like these.

Investing, Stock Thoughts pharmaceuticals, schering-plough, SGP, Stock Thoughts

Recently our good buddy Winston mentioned a few stock ideas in a discussion about Walgreens. He mentioned that Archer Daniels-Midland (ADM: chart, web, Y!) was his buy-it and forget-stock. So I thought I’d dig into the numbers a bit to see if I agree.

Archer Daniels procures, transports, stores, processes, and merchandises agricultural commodities and products primarily in the United States. They operate in three segments, namely oilseeds and corn processing, and agricultural services. Effectively they refine seeds and beens into vegetable oils for the food (i.e. salad dressing) and feed industries.

The AG-services side of the company engages in buying, storing, cleaning, and transporting agricultural commodities, such as oilseeds, corn, wheat, milo, etc, and reselling these commodities to the agricultural processing industry.

An interesting, yet lightly publicized aspect of Archer Daniels is their interest in processing corn. For those of you who regularly read The Corner Office Blog, you know that I view the ethanol boom as nothing more than a farce. However, if you can make money in the face of a farce, by all means, run with the bulls!

Financial Summary

For the most recent quarter, Archer Daniels first quarter (FY08) net sales increased to $12.83 billion, up 35.8% from $9.45 billion for the same quarter in FY07, stimulated by commodity prices, and strong product demand in processing and AG-services segments. Oilseeds Processing sales increased 42.4% to $4.61 billion, boosted by higher prices and volumes due to strong demand for vegetable oil and soybean meal, and the higher average selling prices of fertilizers and oilseeds exported from South America. Corn Processing sales increased 12.6% to $1.52 billion, due to higher average selling prices in sweeteners and starches despite lower sales volumes and lower average selling prices for ethanol, whose current capacity exceeds customer demands.

Read more…

Alternative Energy, Stock Thoughts ADM, archer daniels, food and grain, grain processing, Stock Thoughts