“Let your winners run” is good advice … right up to the point where you end up seeing long-term underperformance because you held on to shares that were overvalued and valuations eventually returned to their long-term norms.
I bring that up because it’s a concern I have with Schneider Electric (OTCPK:SBGSY). Operationally, I have no meaningful doubts that this company will be a long-term winner in electrification, digitalization, and automation, and I still see upside to long-term expectations. This is where “let your winners run” can be good advice – great companies have a habit of outperforming expectations and “growing into” their valuation over time.
On the other hand, in the short run at least, I can’t say Schneider shares are particularly cheap. The valuation isn’t bad relative to many other high-quality industrials, but I find the sector increasingly expensive. All in all, I still lean bullish given Schneider’s strong share in, and leverage to, markets that should outgrow the overall economy, but I wouldn’t fault any investor who holds off in the hopes of buying in on a pullback.
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Schneider Electric's Strong Performance And Long-Term Potential Complicate The Valuation Argument
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