Innovation Investing: Now is the Time to Buy ABB StockCompanies / Tech Stocks May 04, 2012 - 06:11 AM GMT
G. S. Early writes: As investors, we constantly hear that the markets are forward looking. There is a good reason for that.
The future is precisely where smart investors need to be focused these days.
It doesn't matter whether you are investing for income or for growth, it is what's over the horizon that matters most.
One of those horizons is the "New Energy Age".
It's a place where technology is having an enormous impact on how we generate, distribute and consume energy on every level.
And the companies that embrace this paradigm shift are creating a whole new approach to the markets I call Innovation Investing.
One of the poster children for Innovation Investing is ABB (NYSE: ABB). A go-to player in every major market, including the United States, ABB is a must for any long-term investor.
The Story Behind ABB (NYSE: ABB)
The Switzerland-based company is a global leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact.
For some that may sound "green" but for most of its customers, it's about improving efficiencies and the bottom line.
This is a company that is not only a major global player in all the major markets in the world-- developed and developing--but it does almost everything in the energy business. And usually it is on a scale that few others can match.
Plus, ABB kicks off a nice dividend yield that's approaching 4%.
But with all of these global opportunities for ABB, the company's recent quarterly numbers stumbled because China has slowed. That was enough for Wall Street analysts to begin to bail on the stock.
That's true even though ABB has been deeply involved in building out China's energy infrastructure, including China's smart grid. ABB has also been busy in China implementing new renewable energy resources as well as integrating them with traditional energy sources.
At this point, it is safe to say that China is both its brightest spot and its Achilles heel. However, investors shouldn't expect ABB's Chinese troubles to last for long. The opportunities are simply too great.
So for investors built of stronger stuff, and that have a calmer temperament than over-caffeinated Wall Street types, ABB is an excellent long-term "Buy."
Put it this way: If you think the energy and infrastructure sectors are going to be big global markets for the next couple decades, then ABB is a "Must-Buy," especially at these levels.
And while China recovers, ABB gives you the chance to buy the 21st century version of a widows-and-orphan stock at a great price.
China is Just Part of the ABB Story
But enough obsessing over China for a moment...
Here's what's been going on elsewhere in ABB in just the last four weeks:
In the U.S.: ABB received Department of Justice antitrust clearance to purchase Thomas & Betts (NYSE: TNB). The 130-year-old company is well-established in commercial and industrial construction, industrial plant maintenance, repair and operation, electrical utility distribution, and original equipment manufacturing.
ABB also won a long-term service contract from Carnival Corp. (NYSE: CCL) - the largest cruise ship line in the world - to maintain and upgrade ABB's Azipod equipment over the next 15 years for 20 ships in their fleet, cutting costs by as much as $1 million a year per ship.
In yet another contract, ABB secured $45 million from U.S. utility Oncor (formerly TXU), to provide electrical solutions that will increase transmission capacity, ensure grid stability, and facilitate the integration of renewable power in Texas.
In Europe: In Germany, ABB built a link from offshore wind turbines to the mainland grid which has a capacity to transmit 111 megawatts (MW) of clean wind power. That's enough to serve the needs of more than 100,000 households and help save up to 500,000 tons of carbon dioxide emissions per year, once commissioned in 2013, by replacing fossil-fueled generation.
In the Middle East, Asia and Australia: ABB has won a $60 million contract from Shell Gas Iraq B.V. to build a new power plant in southern Iraq. It also has won an order worth approximately $16 million from Mass Global Investment Co. for the construction of a substation and static VAR compensator (SVC) system that will supply electricity to a new melt shop and steel rolling mill in northern Iraq.
ABB also won a $70 million contract to execute substation projects for the Saudi Electricity Company (SEC), the country's national power transmission and distribution operator.
In India, ABB won an order worth $15 million from Delhi Metro Rail Corporation Limited (DMRC) to provide power solutions for a planned metro rail network for Jaipur, the capital of Rajasthan, a state in northern India. And the company is investing another $50 million to expand its power products manufacturing base in the western state of Gujarat.
In Western Australia, ABB has won orders worth around $100 million from Rio Tinto (NYSE: RIO) for 17 distribution substations to support increased production at iron ore mines.
In Japan, AAB won an order worth $60 million to provide complete power and propulsion systems for two new cruise ships to be built by Mitsubishi Heavy Industries.
So, as you can see, China is just a part of the ABB story. In the bigger picture, ABB is an investment in an energy future well on its way to becoming a reality.
What's more the stock went ex-dividend on Wed., May 2, so it's an even better deal now. Buy ABB under $22/share.
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