The Long Case for ABB Ltd.

One exciting investment opportunity identified through a fundamental/earnings quality screen that I run periodically is ABB Ltd. (ABB). ABB is a Swiss conglomerate that provides a wide range of products and services to the power and automation markets. A recent earnings warning from Siemens (SI), another European conglomerate that competes in similar markets, dragged the stock down in sympathy, and now trades at an earnings multiple slightly less than its long term growth rate. I felt the problems at Siemens were company specific, and the market reaction of ABB was unwarranted, creating an opportunity for long term investors to own a great business at a reasonable price.

The investment thesis on ABB is relatively straightforward. ABB has smartly positioned itself as an “energy efficiency” solution provider. Its products & services can be found at every node of the energy value spectrum, resource production, transportation, por generation, por transmission & distribution, and even consumption. Here is a sampling of the types of solutions that ABB offers: