NEW YORK ( TheStreet) -- In factories around the world, it makes everything from helicopters to microchips that get inserted in plastic bottles for identification purposes, and it also has a giant, struggling finance division. The Internal Revenue Service has accused it of making "liberal use of tactics the I.R.S. deems to be illegitimate tax shelters," as Floyd Norris, a columnist for The New York Times, put it in his latest column. No, I am not talking about General Electric ( GE), though you might be forgiven for making that mistake. The company in question is Textron ( TXT), the industrial conglomerate based in Providence, R.I., and while it has a fair bit in common with General Electric, one big difference has been the stock's performance over the last year. While General Electric has gained some 86% over that time, Textron is up a whopping 380%. This disparity says more about how far Textron had fallen than it about how well it is doing, and a report accompanying a downgrade from JPMorgan Chase this week says that the company is "up off the mat," but still vulnerable to a weaker-than-expected economy. So what about the "illegitimate tax shelter" issue? Though Textron lost in the Court of Appeals for the First Circuit , and has appealed to the Supreme Court, it doesn't specifically mention the case in its 10-K filing for fiscal 2009. Instead, it makes a blanket statement about a wide variety of "actual and threatened legal proceedings," noting that "certain claims brought by the U.S. Government could result in our suspension or debarment from U.S. Government contracting for a period of time," but that "on the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations." Textron spokesman Michael Maynard says it is Textron's position that the statement "complies with the SEC reporting requirements." When I see something like that, I am ready to throw in the towel in terms of getting enough of an understanding about a company to recommend it to investors. When a company makes so many things it would take at least a day with the CEO to understand what they all are, and has a big financial division, giving it lots of opportunities to smooth out earnings, and is involved in a protracted battle with the I.R.S. that it doesn't mention in its 10-K, I'd say retail investors are in way over their heads. However, according to Yahoo! Finance, retail investors own 21% of the company.
Textron may turn out be amazingly cheap despite its huge run-up. Cai von Rumohr, an analyst with Cowen & Co., thinks Textron has a valid argument in its case with the IRS. Von Rumohr, who has a "neutral" rating on Textron's stock, says the company gives fairly granular data on the performance of individual business units. "To the extent other companies are good, I think they do a fairly good job," he says. Indeed, looking at Textron's website, I got a much quicker sense of what matters to investors than I get from General Electric's site, which I have visited more frequently. From the home page, if you click on "Textron Businesses," you can see that revenues for each of the five major segments are prominently displayed. Still, when I saw that the financial unit accounted for just 5% of 2008 revenues, I described it to von Rumohr as "small." He said the unit is actually "enormous" if one looks at it in terms of its debt load. I could not find that on Textron's annual report, but I saw that the $294 million the financial unit lost in 2009 nearly cancels out the $304 million earned by Bell Helicopter, its most profitable division. Textron trades at 16.65 times 2012 earnings, and it may be worth twice that, but I wouldn't buy it at half the price. Meeting minimum SEC disclosure requirements isn't good enough for me. -- Written by Dan Freed in New York.