The electrification and automation markets have certainly been impacted by COVID-19, but Schneider (OTCPK:SBGSY) (SCHN.PA) continues to execute at a high level. Benefitting from healthy demand in areas like data centers, utility smart grids, and building automation, Schneider’s business held up well during the first half of the year. Moreover, the company continues to invest in its future, with its majority-owned software operation AVEVA (OTCPK:AVVYY) acquiring OSIsoft in a widely-expected deal.
Since my last write-up, the local shares have more or less kept pace with the broader industrial group, while the ADRs have outperformed (up more than 40%). ABB (ABB) has led the sector lately, but the Schneider ADRs have done well relative to other players like Eaton (ETN), Emerson (EMR), and Rockwell (ROK) while the local shares lagged a bit – pull the comparison out to a year though, and only Rockwell has outperformed Schneider.
I still love Schneider as a business, but the rally in industrials has mopped up a lot of the value I saw earlier in the year. Schneider now looks priced like the high-quality industrial it is, but unless you view prospective returns in the neighborhood of 7% as “the new 10%” (given lower interest rates), I think the shares look more like a hold than a buy.
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Schneider Electric Outperforming Through The Downturn And Adding More Software Assets
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