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United Tech, Disney and investor sentiment: What to watch today

Michael Santoli
Michael Santoli

Here are three things to watch today in the markets.

Number One:

What could be a more obvious move than “spinning” your helicopter business?

This is what United Technologies Corp. (UTX) might do with Sikorsky Aircraft, its market-leading rotorcraft division, according to reports today as the company meets with analysts and investors.

Helicopters don’t have much to do with elevators or air conditioners, United Tech’s other big operations, so expect the spinoff idea to be warmly received by the Street today if it’s confirmed.

Spinoffs as a category are one of the few win-win propositions, historically, with companies shedding ancillary divisions and investors getting a new stock linked to freshly motivated management.

The more interesting question here, though, is whether this might be part of a new wave of “de-conglomeratization.” Industrial conglomerates go in phases of bulking up and slimming down. United Tech, along with peers Honeywell International Inc. (HON), General Dynamics Corp. (GD) and Textron Inc. (TXT) have seen their shares flatten out in the last year after a nice run. None are particularly cheap, and the companies might look to asset reshuffling to get investors interested again.

Note, too, that the least wieldy conglomerate of recent times, General Electric Co. (GE) is in the news today considering a further shrinkage of its banking business.

Fit-and-focus is the investment-banking buzz phrase we might start hearing more of.

Number 2:

The biggest knock on Walt Disney Co. (DIS) these days is that it’s just too good and everyone pretty much knows it. Which is not much of a knock.

The best brands, the sharpest management in media or maybe anywhere and the sweetest lineup of known positive events stretched out ahead of it like Tinkerbell’s sparkly contrails have spoiled investors, who are up 200% in the stock in the past three-and-a-half years.

You won’t hear that fairy tales can’t come true today when CEO Bob Iger presides over the Disney annual shareholder meeting in San Francisco, across the street form “Star Wars” creator Lucasfilm’s magic factory. Less than 24 hours after this victory lap, the new live-action “Cinderella” film will open to a monster weekend. The release will be followed in May by “Avengers 2,” then the new “Star Wars,” and not far behind that the opening of Shanghai Disney.

Disney shares have pulled back slightly this month from all-time highs after vaulting over $100 after last quarter’s results. Every pullback in this stock has been a gift for years on end.

The only thing that could upend the happy story ultimately is probably the buckling of the whole pay-TV ecosystem that’s nourished Disney’s ESPN.

But that’s not today’s business.

Number 3:

The little guy is getting a bit nervous and confused, and that’s comforting news.

The weekly AAII survey of individual investors is unscientific, yet still widely followed and often useful over the short term. The latest mood check showed the number of bulls in the poll dropped to 31.6%, the lowest level since last July.

Those “neutral” on stocks over the next six months jumped to 43%, an unusually high number of sidelined, noncommittal folks – the most since May 2014.

Both show the small guy has been made uneasy by the recent market pullback, especially in popular blue-chip dividend stocks, most likely.

All else being equal, these numbers tilt in favor of those looking for a dip-buying opportunity developing before too long.