Tuesday, April 6, 2021

With Attractive Exposure To Multiple Secular Growth Markets, Siemens' Undervaluation Is Unusual

 

Follow stocks long enough and your initial reaction to seeing an undervalued mega-cap will probably be less "what a bargain!" and more "what am I missing?" That seems particularly relevant in the case of Siemens (OTCPK:SIEGY), as this slimmed-down and refocused industrial conglomerate is well-positioned in attractive end-markets like industrial automation, industrial software, electrification, building modernization/control, healthcare, smart infrastructure, and mobility… and yet the shares still trade at what appears to be a long-term discount to other quality industrials.

Siemens shares (the ADRs) have risen a little more than 25% since my last write-up, doing a little better than the S&P 500, but lagging the broader industrial space. While automation companies haven't really been posting outstanding performances in that time, Siemens' performance is still toward the lower end of the range, with Emerson (EMR), Fanuc (OTCPK:FANUY), and Yaskawa (OTCPK:YASKY) outperforming, and ABB (ABB), Rockwell (ROK), and Schneider (OTCPK:SBGSY) posting similar performances (likewise for more software-driven names like Dassault (OTCPK:DASTY) and Hexagon (OTCPK:HXGBY).

At this point I still think Siemens is attractive on a relative basis. Further portfolio refinement seems highly likely, and while I think M&A may still be on the docket, the company doesn't need to do large-scale M&A to participate in numerous attractive end-markets with above-GDP multiyear growth potential.

 

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With Attractive Exposure To Multiple Secular Growth Markets, Siemens' Undervaluation Is Unusual

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