Although I still think that there is more risk to growth for industrial companies in 2021 than is reflected in valuations, there’s been a relatively good tenor of companies guiding that the second quarter was indeed the trough. That was true for ITT (ITT), and I likewise think it’s important to note that decremental margins have been better than expected, as this company has done quite well with its expense reduction efforts. Prolonged weakness in end-markets like aerospace and oil/gas is certainly a threat, but I likewise see a still-underappreciated opportunity to gain share in auto brake pads.
I bought ITT shares close to the price of my last update on the company, and I can’t complain about the performance since then – up over 20% since my last update, beating industrial peers by around five points. I’m a little concerned that worries about weakness in aero, oil/gas, and process industries is going to loom larger, as ITT is likely to undergrow peers/rivals like Dover (DOV) over the next few quarters, but the valuation is still fairly good (particularly on a relative basis). With that, I’m content to continue owning these shares, and I still think it’s an above-average idea in the industry sector.
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