When it comes to the industrial sector, some conglomerates are more focused than others,confining their businesses solely to those of an industrial nature.

And since much of the activity in the sector involves infrastructure, conglomerates that are pure plays in this high-growth area are better positioned than fellow industrials such as Fairfield, Conn.-based General Electric Co. GE has significant exposure to consumer finance as well as media and entertainment.

Four companies focused exclusively on industrial businesses that global money managers currently prefer are Washington, D.C.-based Danaher Corp. , Glenview, Ill.-based Illinois Tool Works Inc. , Bermuda-based Tyco International Ltd. and Hartford, Conn.-based United Technologies Corp.

UTC is the largest of the four, with $40 billion in revenue for the nine months ended Sept. 30. (All figures are in U.S. dollars.) Second in size, Tyco’s revenue was $18.8 billion for the 12 months ended Sept. 28.

Tyco used to be much bigger, however. In fiscal 2006, the company had revenue of $38 billion, but that was before it was divided into three distinct businesses. In June, Tyco spun off its electronics and health-care businesses into the publicly listed Tyco Electronics Ltd. and Covidien Ltd., respectively, leaving the original Tyco to focus on the industrial business.

On the lower end, Illinois Tool Works had revenue of $12 billion for the nine months ended Sept. 30 and Danaher had revenue of $7.9 billion for the nine months ended Sept. 28.

In terms of similarities, UTC and Tyco both have security and fire-protection businesses. But the similarities end there. UTC produces aircraft engines, gas turbines, space propulsion systems, helicopters, elevators, escalators, moving sidewalks, and heating, ventilation, refrigeration and air-conditioning equipment. It also produces fuel cells and other industrial products.

Tyco produces flow-control products for pipelines and water systems, thermal controls, valves, galvanized steel tubes, armoured wire and cable, and other metal products.

Danaher’s businesses are professional instrumentation (electronic testing and water-related environmental analysis and treatment), medical technologies (including dental), industrial technologies (systems to maintain an unbroken chain of inventory and quality control) and tools, as well as components.

Illinois Tool produces small plastic and metal components and fasteners, construction products, switches, sensors and electronic control solutions, welding and cutting equipment, and specialty equipment.

Here’s a closer look at why global money managers consider these companies to be good investments:

> Danaher Corp. The conglomerate’s margins will be negatively affected in the short term by its acquisition of Beaverton, Ore.-based Tektronix Inc., says Patricia Fee, money manager at I.G. International Management Ltd. in Dublin. But she likes Danaher as a longer-term investment.

Fee believes Danaher will see substantial synergies and cost improvements from the Tektronix acquisition, which complements Danaher’s electronic-testing business. The price-tag for Tektronix, which had revenue of $1.1 billion in the fiscal year ended May 26, was about $2.8 billion.

Carlee Price, a research analyst with Franklin Resources Inc. in San Mateo, Calif., is also positive on Danaher. She calls its stock “inexpensive, considering its growth profile.” She expects the company to have stronger growth than its peers in 2009, with a resulting expansion of its multiples.

Although Danaher’s exposure to North America is about 50%, Price likes the company’s management, its growth record and its focus on expansion into high-tech businesses. Besides Tektronix, which is more global than Danaher, the parent company has made a number of acquisitions in the dental-equipment space, which, says Price, is a good growth area in the U.S.

An Oct. 18 report by New York-based Argus Research Co. confirmed a “buy” recommendation on Danaher and raised the 12-month target price for the company to $92 a share from $90. Danaher shares were trading at $85 a share in mid-November on the New York Stock Exchange. Brothers Steven Rales, Danaher’s chairman, and Mitchell Rales, a company director, collectively own 20% of the shares.

The Argus report applauds the company’s strategy of making “smart, bolt-on acquisitions and then expanding margins through low-cost regional sourcing, lean inventory and productivity initiatives.” The report calls the Tektronix deal “a good fit.”

A recent report from J.P. Morgan Secur-ities Ltd. in New York rates Danaher an “overweight” but does not provide a target price. The report views the company’s price, at 20 times 2008 earnings, as attractive “given the quality of the franchises, a track record of consistent above-average growth in free cash flow and earnings, and an outlook for strong growth in a sustainable economic recovery.”

@page_break@Danaher’s net income was $1 billion in the nine months ended Sept. 28, up from $798 million during the same period a year earlier. Revenue was $7.9 million vs $6.8 million a year earlier. Long-term debt was $1.9 billion as of Sept. 28.

> Illinois Tool Works Inc. Fee is enthusiastic about this company, calling its valuation “reasonable” and pointing to its “extremely strong balance sheet,” its 40% non-U.S. exposure and the fact that it has no significant exposure to U.S. construction or auto industries.

J.P. Morgan began its coverage of Illinois Tool in August with an “overweight” recommendation, referring to the company as “a high-quality way to play the diversified industrial sector.” The J.P. Morgan report considers this a good time to buy Illinois Tool’s stock because it is trading at the low end of its historical range as a result of market concerns about its exposure to the housing and auto sectors.

According to the J.P. Morgan report, Illinois Tool is “one of the best-run diversified industrial manufacturers, characterized by its above-average long-term return on invested capital and operating margins, strong cash-generating capabilities and low earnings-per-share volatility.”

However, an Oct. 18 report by UBS Securities LLC in New York rated Illinois Tool as “neutral,” adding that the stock is “currently fairly valued.” UBS’s 12-month target price is $59 a share vs the $56 that the widely held shares were trading at in mid-November on the NYSE. Harold Smith, a company director, owns 11% of Illinois Tool’s shares.

The UBS report says that although Illinois Tool has noted strength in a number of markets, it has “acknowledged a more downbeat assessment of the U.S. housing market, its expectations of slower growth in Europe in 2008 and a 6% decline in nonresidential construction awards, which could make 2008 a ‘relatively difficult year’ for nonresidential construction activity in the U.S.”

Net income was $1.4 billion in the nine months ended Sept. 30, up from $1.3 billion in the same period in 2006. Revenue was $12 billion vs $10.4 billion a year ago. Long-term debt was $1.6 billion as of Sept. 30 — but Fee points out the company is effectively debt-free because it generates about $1.2 billion in free cash flow annually and also had $600 million in cash as of Sept. 30.

> Tyco International Ltd. A Nov. 15 UBS report had a “buy” rating on Tyco, although the 12-month price target for the Tyco stock was reduced to $57 a share from $60. The widely held shares were trading at $41 a share in mid-November on the NYSE.

The UBS report lowered the share price target when Tyco released its financial results for the fiscal year ended Sept. 28 and, for the first time, provided guidance for 2008 — some figures for which were lower than anticipated.

Nevertheless, the UBS report says, Tyco offers “an attractive mix of later-cycle industrial exposures, favourable secular growth components, a significant cost-reduction program and an attractive valuation.”

The price target assumes Tyco will trade at a 0%-5% premium to its peers and includes about $3 a share for the company’s excess cash. Cash and cash equivalents were $1.9 billion as of Sept. 28.

J.P. Morgan’s Nov. 15 report confirms an “overweight” rating on Tyco: “We see relatively attractive, lower-risk earnings growth potential at a reasonable price.” The report suggests Tyco’s stock is “relatively undervalued” by about 20% vs its peers’ 2008 earnings before interest, taxes, depreciation and amortization.

A J.P. Morgan report first put the “overweight” rating on Tyco on Sept. 13, based on a $1-billion share-repurchase authorization and an increase in the quarterly dividend. The report viewed those moves as confirmation that returning cash to shareholders is a top priority for management.

Although the Nov. 15 J.P. Morgan report called Tyco’s fourth quarter “messy,” which was expected, the report says the results “showed progress,” particularly “execution on what looked like an aggressive free cash flow target [that] lends credibility” to Tyco management’s ability to deliver on free cash flow.

The J.P. Morgan report further notes that Tyco has leading market share in: global security (11%), for which growth of 5%-7% is expected; global fire (12%), with expected growth of 3%-4%; and global industrial valves and controls (5%), with expected growth of 4%-5%.

In a Nov. 16 report, however, Argus rated Tyco a “hold”: “While we like the new Tyco’s long-term prospects, we believe the company may face a difficult transition period as a smaller operation. The planned restructuring program also holds risk.”

The Argus report indicates Tyco could be upgraded to a “buy” if the company “is able to maintain its top-line momentum along with margin improvement from its restructuring efforts.”

The flow-control market is expected to grow only modestly in 2008, and Tyco has noted that volatility in electrical and metals will have a greater impact on Tyco than previously because those businesses now represent a bigger share of its operations.

Tyco reported a net loss in the year ended Sept. 28 of $1.7 billion vs a profit of $3.6 billion a year earlier. (Last year’s figures exclude the results of Tyco Electronics and Covidien.) Revenue was $18.8 billion in fiscal 2007 vs $17.3 billion in fiscal 2006. Long-term debt was $4.1 billion as of Sept. 28.

> United Technologies Corp. An Oct. 17 Argus report has a “buy” rating on UTC’s stock, with a 12-month price target of $85 a share. The widely held shares were trading around $75 a share in mid-November on the NYSE.

The J.P. Morgan report gave an “overweight” rating on UTC’s stock, but without a price target; Fee also favours the company’s shares.

The Argus report says UTC benefits from strong demand in emerging markets and in global aerospace, as well as from favourable exchange rate trends. As Fee notes, 62% of the company’s revenue is from outside the U.S.

A J.P. Morgan Oct. 18 report says: “UTC should generate long-term revenue and earnings growth in excess of the aerospace/defence industry average at lower risk, which warrants a premium valuation.” UTC is currently trading at a 5% discount to J.P. Morgan’s aerospace and defence coverage universe.

UTC’s guidance is for mid-single-digit revenue growth and 10%-14% earnings growth in 2008. The J.P. Morgan report expects revenue to increase by 7.4% and earnings by 15%.

Fee likes UTC’s strong franchises, including Otis Elevator Co.; Pratt & Whitney, which manufactures aircraft engines and gas turbines; and UTC Fire & Security. She also notes that 50% of UTC’s business comes after the sale of the original equipment through service contracts, producing stable revenue flow.

Net income was $3.2 billion in the nine months ended Sept. 30, up from $2.9 billion in the same period a year earlier. Revenue was $40 billion vs $35 billion a year ago. Long-term debt was $7.1 billion as of Sept. 30. IE