Thursday, May 4, 2017

Rockwell Back To Work

My investing world feels more normal now that Rockwell Automation (NYSE:ROK) is back to a point of generous, if not excessive, valuation. While the shares offered investors a rare opportunity a year or so ago, the stock has been strong as industrial markets have started to turn in the company's favor.

There's a lot to like about Rockwell, as it touches multiple popular themes like manufacturing reinvestment/capex recovery, reshoring, potential favorable tax changes, natural resource recoveries, and the industrial internet of things (or IoT). Moreover, management seems to be more willing to consider M&A as a means of rounding out its offerings and enhancing its addressable market.

Valuation has been a challenge with Rockwell in the past and so again today. With the shares already pricing in close to 10% long-term free cash flow growth, I don't think you can say that the company is underrated. Good companies have a way of outperforming, and Rockwell certainly qualifies, but I'd really like to get another crack at this at a lower valuation.

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Rockwell Back To Work

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