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Posted at 13/5/2010 06:37 by sheeneqa B LTD. (TICKER: ABB) has been off many investors' grids for too long.Swiss-based ABB, which makes automated technologies for utilities and other industrial clients, had a difficult time throughout the global recession as spending on infrastructure dwindled. But investor pessimism has opened a window of opportunity for a stock that is highly leveraged to a global upturn, signs of which are already appearing. ABB's American depositary shares trade at just 13 times forward earnings, with a 2.4% yield. Yet the company is projected to generate earnings growth of well over 30% in 2011. |
Posted at 09/2/2010 16:42 by grupo guitarlumber Investor calendar 2010 February 18 Fourth-quarter and full-year 2009 results April 22 First-quarter 2010 results April 26 Annual General Meeting Zurich, Switzerland April 27 Annual Information Meeting Västerås, Sweden July 22 Second-quarter 2010 results October 28 Third-quarter 2010 results |
Posted at 27/11/2009 10:35 by grupo guitarlumber 3rd UPDATE: ABB To Restructure Automation Business(Adds CEO comment and detail.) By Goran Mijuk Of DOW JONES NEWSWIRES ZURICH -(Dow Jones)- Swiss engineering company ABB Ltd. (ABB) Friday said it will overhaul its multi-billion-dollar automation business in an effort to better tap growth in a difficult economic environment. The revamp raised hopes ABB would find fresh pockets of growth in businesses such as renewable energy and further squeeze costs. It also rekindled hopes ABB might be preparing for a bigger acquisition in the automation field. As part of the restructuring, the company said its business units automation products and robotics will be regrouped from Jan. 1, 2010, into two new divisions--discrete automation and motion, and low-voltage products. ABB said its process automation division, which manufactures electrical motors and generators, will remain unchanged except for the addition of the instrumentation business from the automation products division. "ABB's automation businesses, with their focus on productivity and energy efficiency, have tremendous scope for growth," said Chief Executive Joe Hogan. "We have strengthened the market approach by grouping together businesses with similar customers, technologies and service models, which will help us accelerate the development of solutions for our customers." Hogan said the revamp would facilitate the integration of potential acquisitions, but was done primarly to improve ABB's market access and help it generate a bigger and more stable revenue share from service offerings. "I've been thinking about a new strucuture for the last few months," Hogan said during a conference call, adding the company's automation business looked the "most confusing" to outsiders, including investors and clients. The new structure should allow clients to realize and better tap ABB's entire range of product offerings, Hogan said. ABB will provide fresh revenue and profit goals next year for the new divisions, which have been under pressure amid the economic downturn as clients have shelved industrial production projects due to sagging consumer demand and a shortage of credit. In the third quarter, overall orders fell around 20% to $7 billion while revenue dropped 10% to about $7.9 billion, helped partly by ABB's still-solid power infrastructure operations. ABB's robotics unit, which manufactures industrial robots for the automotive, construction and airline industries, has been suffering from a decline in orders of more than 50% during the past few quarters. ABB's low-voltage products division, which has annual sales of about $4.8 billion, should benefit from still relatively healthy demand for electrical equipment, the company said. The unit will be led by Tom Sjoekvist. The new discrete automation and motion division, which will be run by Ulrich Spiesshofer, should increasingly tap into growing market segments for renewable energy. It should also benefit from ABB's robot expertise that should give the company an advantage over competitors such as Germany's Siemens AG (SI) and U.S.-based Rockwell Automation Inc (ROK). The division had pro forma sales of about $6.6 billion in 2008. Process automation, which will continue to be led by Veli-Matti Reinikkala and has annual sales of about $8.4 billion, should benefit from the integration of the instrumentation business as measuring temperature, flow and pressure are key to optimizing industrial processes, ABB said. Analysts welcomed the changes, expecting the new structure to help ABB further take out costs and adapt better to changing customer needs. "The new divisional structure could also hint at upcoming mergers and acquisition activity," said Panagiotis Spiliopoulos, analyst at Bank Vontobel, who rates the stock at hold. ABB last February ousted its long-standing CEO Fred Kindle, who left the firm amid a dispute over the company's acquisition strategy, which the board considered to be too tame. The company's appointment of deal maker Hogan, who joined from General Electric Co (GE), was taken as a sign ABB would use some of its liquid assets for a bigger buy instead of a flurry of minor deals. But so far no major acquisition has emerged as Hogan's arrival coincided with the start of the economic downturn, pushing him to concentrate on cost cutting and streamlining ABB's businesses in Europe and the U.S., which were hit hardest during the downturn. However, hopes are still alive ABB could spend some of its more than $5 billion in cash for a major acquisition that would boost its market share and help generate more economies of scale. At 0949 GMT, ABB's shares traded up CHF0.05, or 0.3%, at CHF18.6 while the broader Swiss market traded down 0.5%. The stock has gained about 19% in value this year |
Posted at 19/10/2009 09:47 by waldron 2nd UPDATE: ABB Sees 3Q Net Profit Of $1 Billion; Provisions Smooth(Adds analyst comment.) By Katharina Bart Of DOW JONES NEWSWIRES ZURICH -(Dow Jones)- Power transmission and automation company ABB Ltd. (ABB) said Monday it will report roughly $1 billion in net income for the third quarter, bolstered by some provisions for restructuring, tax matters and compliance being freed up. While ABB will lift provisions to do business in Russia, others such as those linked to a European Union probe will be reversed, resulting in a $380 million lift to the third quarter's earnings. The higher provisions in Russia are linked to an ongoing value-added tax dispute, ABB said. "As a result, ABB continues reviewing the situation and assessing its business model in Russia," the company said in a statement. ABB will book an undisclosed reversal of existing provisions after the E.U. fined six companies, including ABB, a total of EUR67.6 million for colluding in the power transformers market. ABB got the highest E.U. fine - EUR33.8 million - because the company had participated in a similar cartel before. A spokesman didn't provide any further details of the Russian or the competition provisions. Analysts drew reassurance from ABB's statement, which comes ahead of complete quarterly earnings Oct. 29. "The announcement removes the uncertainty regarding the provisions related to anti-competitive practices and we see this as evidence of ABB's conservative provisions management," Bank Vontobel analyst Patrick Rafaisz wrote in a note to investors. He rates the stock at hold and put his CHF20 target under review pending forecast changes to account for the lower provisions. However, the stock fell in early trading, analysts said because ABB's statement points to a lower-than-expected third-quarter profit from regular business, flattered by reversals on provisions, which analysts said aren't taxed. At 0850 GMT, the shares were CHF0.08 lower, or down 0.4%, at CHF21.74, amid a higher broader Swiss market. Company Web site: -By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjo |
Posted at 13/5/2009 11:58 by waldron ABB Secures Contract For First Solar Power Project In U.S. May 13, 2009 ABB, the leading power and automation technology company, recently announced that it has secured its first Solar Thermal Power Project in North America with eSolar, producer of scalable solar thermal power plants, based in Pasadena, California. ABB has provided eSolar equipment and engineering services in the development of the Sierra commercial demonstration facility. The Sierra project is a solar thermal power plant design consisting of two solar light receivers, with each receiver being supported by a field of 12,000 heliostat reflectors. The reflected light from each heliostat is captured at the receiver and used to convert water to steam. eSolar selected ABB because of its power generation balance of plant expertise, its ability to co-develop the balance of plant controls design and meet accelerated project schedule demands, and because ABB is an established international power and automation solutions provider. "We quickly realized that ABB possessed the elements to play a critical role in the development of our Sierra project," said Bill Gross, eSolar CEO. "ABB's contributions have already exceeded our expectations, both in design and implementation. Coupling ABB's technology expertise with eSolar's concentrated solar thermal power (CSP) innovation, our first CSP demonstration site in Sierra will be a model for industry success and also demonstrate the viability of this technology moving forward." ABB's scope of supply includes plant control system design, engineering and implementation, including supervisory controls for interface to eSolar's steam turbine and OPC Interface to the patented eSolar Heliostat Field Control System. In addition, ABB will install a Facet Controls Solution that monitors and evenly distributes the solar light reflected by each heliostat for maximizing the use and life of eSolar's solar thermal receivers. "The solar power niche within the renewable power industry is in its infancy and will soon be in exponential growth mode," said Kevin McAllister, Head of ABB's Power Generation division in North America. "ABB is contracted to work with eSolar to deploy a solution that makes a dramatic reduction in the cost of solar thermal technology by tackling the key obstacles that have characterized large solar installations in the past: price, scalability, speed of deployment and grid impact." By leveraging a proprietary combination of optics and software in a pre-fabricated form factor, eSolar achieves economies of scale while focusing on the key business obstacles that have characterized large solar installations price, scalability, speed of deployment and grid impact. eSolar has partnered with Idealab, Google.org, Oak Investment Partners, and other investors to develop large and utility-scale power projects around the world. About ABB ABB is a leader in power and automation technologies that enable utility and industry customers to improve their performance while lowering environmental impact. The ABB Group of companies operates in around 100 countries and employs about 120,000 people. The company's North American operations, headquartered in Cary, North Carolina, employ about 15,000 people in 20 manufacturing and other major facilities. For more information, visit: www.abb.com. SOURCE: ABB |
Posted at 05/5/2009 13:09 by grupo guitarlumber ABB Views Once in Lifetime Takeover Options From Atop Cash Pile Share | Email | Print | A A A By Antonio Ligi May 5 (Bloomberg) -- ABB Ltd. Chief Executive Officer Joe Hogan sees once-in-a-lifetime acquisition opportunities that will test his will to preserve the company's balance sheet and $5.4 billion cash pile. "We don't quite know how much cash we're going to need, or when we're going to need it, and so we are managing our balance sheet very carefully," Hogan said. "Most likely we will come across opportunities to acquire assets at prices we may never see again in our lifetimes, and so we also want to be in a position to seize these chances." ABB faces difficult years in 2009 and maybe 2010, said Hogan, who became chief after his predecessor quit over a strategy dispute with Chairman Hubertus von Gruenberg. Hogan, giving his first annual speech to investors since joining ABB from General Electric Co. in September, faces a slowdown in so- called base orders, contracts below $15 million that form the backbone of profits. "Because forecasts are very risky, we will run the business based on our order rates, not on some hopefulness that business will be better in the second half of this year or in the first half of next," Hogan told shareholders. A $25 billion order backlog and large-scale energy projects in the Middle East and Europe helped buoy bookings. Von Gruenberg said that 60 percent of the 2008 order backlog will convert into 2009 sales. The power transformers business continues to operate at "high" capacity while power-transmission demand will remain "strong" because of infrastructure needs in China, India and the Middle East, Hogan said. Demand in the oil-and-gas market is showing resilience, he added. ABB rose 14 percent this year in Swiss trading, increasing the market value to 41.2 billion Swiss francs ($36.3 billion). The stock advanced 0.7 percent to 17.72 francs as of 10:50 a.m. local time. To contact the reporter on this story: Antonio Ligi in Zurich at aligi@bloomberg.net Last Updated: May 5, 2009 04:53 EDT |
Posted at 28/2/2009 18:50 by waldron 2/28/2009 9:48:00 AM Barron's: The Smart Way To Play The Green Revolution On Main Street, Green is the new Black. On Wall Street, however, most green investments generated a sea of red ink last year. When the wheels came off stock markets around the globe in the fourth quarter of 2008, alternative-energy and clean-technology shares were among the hardest hit. The 88-stock WilderHill New Energy Global Innovation index, a popular green-industry benchmark, ended the year down 61%, versus a 38.5% slide in the Standard & Poor's 500. This year, the NEX -- a mix of mostly small- to mid-capitalization wind, solar, biofuel and energy-conservation leaders from 21 countries -- is off about 22%, lagging the S&P's 17% decline. Other clean-tech indexes, exchange-traded funds and mutual funds, including the vaunted Winslow Green Growth Fund (ticker: WGGFX), haven't fared much better, and in some cases have done worse, while venture-stage green companies have been starved of capital or blocked on their way to the public markets. Brian Fan, senior director of research for the Cleantech Group, cites 80 green companies in the latter boat, burning through a collective $2 billion of venture-capital money with little prospect of going public any time soon. "The companies we talk to are trying to stay solvent," says Fan. Indeed, the same might be said of their financial backers, and other green-oriented investors. A global recession and bear market deserve much of the blame for the carnage in green-tinged shares, as does a $100-a-barrel plunge in oil prices, which suddenly made the drive for sustainable-energy alternatives seem less pressing. Moreover, many clean-tech companies are small and speculative in nature, and serve end markets that depend on government subsidies -- not a particularly attractive investment attribute. Former solar-energy highfliers such as First Solar (FSLR) and LDK Solar (LDK) faced additional challenges last year from sharply escalating prices for polysilicon, the raw material used in solar cells. In toting up the losses, it is tempting to wonder whether green-themed investing was just a sustainable version of sock puppets -- that is, another Wall Street fad. But such musings couldn't be more misguided. In the U.S., President Barack Obama has just pledged to spend billions on environmentally friendly technologies, while Congress is planning to put more money and muscle behind the search for energy alternatives and pollution controls (see page 28). Energy Secretary Steven Chu recently told Barron's sister publication, The Wall Street Journal, that his agency intends to fast-track billions of dollars in loans for alternative-energy projects already "in the pipeline," and that he will try to get roughly half the $37 billion already set aside for clean-tech capital projects distributed within the year. That is just a down payment on much more ambitious economic initiatives, and is mirrored by similar endeavors abroad. Greater government funding bodes well for some pure plays in the solar, wind, ethanol and biomass industries. But it bodes even better, near term, for well-established, diversified and financially healthy companies like Switzerland's ABB (ABB), Florida utility FPL Group (FPL), Waste Management (WMI), Jacobs Engineering (JEC) and electrical-products supplier Eaton (ETN). All are visible and increasingly powerful players in areas given spending priority: energy conservation, infrastructure renewal and the build-out of a "smarter" power grid. To be sure, more public and private spending will benefit alternative-energy giants like General Electric (GE), the biggest U.S. supplier of wind turbines, and United Technologies (UTX), a leader in making buildings more energy-efficient. Johnson Controls (JCI), Honeywell (HON), AES (AES) and others that make sensors and systems needed to optimize HVAC (heating, ventilating and air-conditioning) also belong on any list of likely green winners. So do a handful of midsized players in the fast-growing wind-energy-generati But we consider ABB, Waste Management, FPL, Jacobs and Eaton a sort of green dream team, for all the reasons, and then some, explained below. They probably aren't the first names that come to mind when you think "green," but they have the products, technologies and, not least, the financial strength to deliver for investors. Even better, their stocks are bargains. A provider of power and automation systems, ABB tops most shortlists of companies likely to benefit from large-scale energy projects and conservation initiatives. Among other things, the 125-year-old industrial giant is one of the world's biggest builders of electricity grids. With credit frozen and demand constrained, ABB faces the same challenges as other industrial outfits. But the company, profiled favorably in Barron's last spring ("The GE of Europe is a Major Power Player," May 19, 2008), is better positioned to benefit from more government and industry spending on infrastructure upgrades around the world, says Van Eck's Mitby. Headquartered in Zurich, ABB sells large-scale electrical circuitry, robotics and energy-monitoring and automation systems. It seems to land one multimillion-dollar infrastructure contract after another, including a recent $63 million deal to upgrade a power station in Saudi Arabia. Renewable-energy projects will need ABB's products and services, and its technology, including power-management sensors and load-balancing systems, has kept it ahead of most competitors, says Morningstar analyst Daniel Holland. ABB's shares have been cut by almost two-thirds, to 12, from their high last May, and now trade for nine times 2009 estimated earnings of $1.32 a share, a discount to the S&P 500's price/earnings multiple. Granted, last year's earnings were higher, at $1.74 a share, slightly exceeding expectations. Morningstar puts the company's fair value at 19 a share, some 62% above last week's close. Investors can collect a 46-cent annual dividend (for a current yield of 3.8%) while waiting for the global economy to jump-start. ABB recently shed some poorly performing assets in an efficiency drive of its own. The company boasts a strong balance sheet, and net cash (cash minus debt) of $5.4 billion, or $2.40 a share, Holland notes. It has used excess cash to boost its payout and buy in shares. Twelve-month return on equity of 28.39% is more than three times that of its peer group, which includes industrial outfits such as Emerson Electric (EMR) and Danaher (DHR). "We are in the sweet spot of energy efficiency and of climate change," chief financial officer Michel Demare told Barron's last spring. For ABB, it is about to get sweeter. As the nation's leading producer of energy from wind and solar power, FPL Group is at the forefront of commercialization of these technologies. The Juno Beach, Fla.-based company also is the largest power generator in one of the nation's most populated states. Its regulated utility arm, Florida Power & Light, serves 4.5 million customers and contributes just over half of revenue, which totaled $16 billion last year. A slightly smaller, but faster-growing revenue stream flows from FPL's recently re-christened NextEra Energy Resources subsidiary. This unregulated clean-energy producer sells power throughout the U.S., using a diverse set of low-cost generation assets strategically situated around the country to balance the load. Last year, 38% of Next- Era's capacity came from wind power, which has benefited from the recent extension of production tax credits. NextEra's net income roughly tripled in 2008. The credit crisis and weakening consumer demand have led NextEra to slow the pace of expansion in its wind-power operations, but the company "already controls a fourth of this nation's installed wind-energy capacity," notes Morningstar analyst Ryan McLean. "Nationwide, total capacity is somewhere around 25,000MW [megawatts], and NextEra has 6,375MW and growing." Wind is a relatively low-cost and profitable revenue stream for the company, which expects total profit to grow by double-digits through 2010. FPL reported adjusted earnings of $3.84 a share last year, of which Next- Era contributed $2.04. The company could $4.07 this year, and $4.54 in 2010. Although its regulated utility has experienced reduced demand, FPL is better-positioned than most. Moreover, Florida's relatively favorable regulatory environment encourages additional investments in capacity that could boost the utility's earnings. FPL emits less carbon than most other utilities, and will benefit from a "greenhouse gas-constrained regulatory environment," says Ken Stern, a San Diego money manager. But the company stands to profit most from national initiatives to expand wind-energy generation and bolster transmission facilities. "Transmission development had double-digit growth prospects before the credit crunch, and now, favorable legislation is coming in terms of taxes and the fast-tracking of capex [capital-spending] opportunities," says Van Eck's Mitby. The company recently launched a new venture: hybrid hydraulic/electric alternatives for fleet-vehicle propulsion, including one system built with the U.S. Environmental Protection Agency (EPA). Designs vary, but basically capture energy from braking and other subsystems to augment or replace the traditional diesel engine. Particularly promising for city buses, delivery trucks and other vehicles that start and stop frequently, the EPA estimates such powertrains could produce fuel savings of 20% to 40%, and cut carbon emissions by as much as 40%. So far, those vehicles are limited to pilot programs, but the "pilots" include big customers like United Parcel Service, Federal Express and Wal-Mart, as well as school buses used as far away Melbourne, Australia and Guangzhou, China. Eaton has many competitors, but unlike others that dream of replacing the combustion engine, it has been an automotive-technolog With 2008 sales of $15.4 billion, the Cleveland-based company has the design, manufacturing and financing in place to scale its ideas. Its truck group alone sells $2.3 billion of transmission and hybrid-power and exhaust systems for trucks, buses and agricultural equipment. Eaton knows its customers, and the costs and challenges of operating in 150 different countries. But its strengths also raise concerns. "I like Eaton, but I'm worried about its earnings [expectations] earnings being overly optimistic due to its heavy exposure to the auto industry," says Ken Stern, the San Diego investment manager. Morningstar analyst John Kearney is more upbeat, noting an aggressive acquisition strategy has diversified the company's revenue and profits. Draconian cost-cutting measures also have helped. Eaton earned $6.83 a share in 2008. This year, management is guiding profit expectations downward to between $4.20 and $5.20 a share; the wide range reflects economic uncertainties. Eaton has paid a dividend for 85 years, and yields 5.41%. Its current payout, $2 a share, must have been of some comfort to investors, whose shares have lost about half their value in the past year, and now trade around 36. At least one savvy holder used the opportunity to snap up more stock: Warren Buffett's Berkshire Hathaway (BRKA) upped its stake in Eaton in the fourth quarter to 3.2 million shares, from 2.9 million. Like Buffett, we don't know where Eaton will trade in a month or a year, only that the products, services and ingenuity of Eaton and companies like it are making the world greener and cleaner. When the smoke -- or is it carbon? -- clears, they and their shareholders are likely to rewarded. |
Posted at 12/2/2009 19:11 by grupo guitarlumber source: ftABB details moves in erratic markets By Haig Simonian in Zurich Published: February 12 2009 18:15 | Last updated: February 12 2009 18:15 ABB on Thursday stepped up its restructuring programme and said it would suspend share buy-backs, as the Swiss-Swedish engineering group reacted to what it called the most unpredictable markets in memory. The response came as the group, which surprised investors with a sharp fall in large orders in the third quarter, said weakness had continued into the final three months. EDITOR'S CHOICE ABB issues profits warning on legal rows - Dec-19ABB appoints former GE healthcare chief - Jul-17Orders for products, such as power lines, transformers and automation equipment, fell 19 per cent to $7.2bn in the fourth quarter. As in the previous quarter, the declines were for "big" orders worth more than $15m, which dropped by half in local currency terms, although smaller orders fell only 2 per cent in the period. Joe Hogan, ABB's chief executive, said uncertainty about the world economy and extreme irregularity in order inflows made an outlook statement impossible. He said orders in the final quarter had been down in October, extremely weak in November and resilient in December. ABB said it did not expect any big improvement in the world economy this year. However, the group retained its medium-term profit and efficiency goals, on expectations of a recovery in infrastructure orders, notably in electricity, through special government spending programmes. ABB's $24bn order backlog, forecast productivity gains and a faster shift into services further underpinned that confidence. Mr Hogan said ABB would take one-off restructuring charges of $300m this year and $160m in 2010, after $140m in 2008, to cut costs by an annual $1.3bn. He declined to quantify job losses, but said ABB would accelerate sourcing from lower cost locations and continue relocating factories as required. General and administrative costs would be squeezed by 10 per cent. But Mr Hogan, selected to become chief executive after a career at General Electric partly on a mandate to boost growth, said ABB would also use its strong balance sheet to pursue opportunisticacquisi While the group would avoid large deals, he said ABB's SFr5.4bn ($4.6bn) net cash and low 17 per cent gearing left it well placed. Net profit in the fourth quarter fell to $213m after $870m in provisions, mainly for pending legal investigations. Sales rose 5 per cent to $9.14bn. For the full year, net profits declined 17 per cent to $3.12bn, while sales climbed 20 per cent to $34.91bn. |
Posted at 21/11/2008 13:10 by waldron Published November 19, 2008 | A A A Mutual Funds by Rob Wherry (Author Archive) Stimulus Plan May Lift Infrastructure Plays There's a long list of things Barack Obama would like to accomplish once he takes over the Oval Office in January. No doubt sitting squarely at the top of that list is getting the economy moving in the right direction. A step toward achieving that goal would be to unveil the stimulus plan that was talked about on the campaign trail by the president-elect and more recently by his advisory team. While it's still too early to know what form a plan like this would take -- much less its price tag -- it would probably focus on infrastructure projects across the country, both building new bridges, roads and municipal systems and repairing outdated ones. In the process, the plan could potentially create thousands of jobs and at least kick-start the economy until other initiatives took hold. "It makes a lot of sense to use [a stimulus] to spur the economy along," says Michael Church, a portfolio manager at Church Capital Management in Yardley, Pa. There's an investing adage being bandied about these days amidst all the talk of bailout plans: Buy what the government is buying. That saying could easily be extrapolated to include infrastructure, as well. While there are certain risks involved with playing this theme -- Obama hasn't even been sworn in yet -- there are plenty of investors who are taking a serious look at individual companies in the sector, mutual funds and ETFs that focus on it, too, with an eye toward getting in early in anticipation of an announcement in 2009. Infrastructure is a broad investment category and one that is sorely in need of investment, even before talk of a stimulus was broached. Traditionally, it includes all the construction and engineering firms that specialize in public works projects and the suppliers of concrete, steel, heavy equipment and manpower that go into bringing the projects to fruition. Infrastructure can also encompass electrical grids and utilities, water and sewer systems, energy pipelines, and solar and wind assets. It's a vast sector and one that's aging. A study by the American Society of Civil Engineers estimated $1.6 trillion is needed to get the country's bridges, roads and other systems up to acceptable levels. There are some obvious major players in the infrastructure space. Fluor (FLR: 29.56, -2.35, -7.36%) is a sprawling construction and engineering firm that's been doing these types of projects for almost a century. General Electric (GE: 12.74*, -1.71, -11.83%), Siemens (SI: 47.75, -1.97, -3.96%), ABB (ABB: 9.12, -0.58, -5.97%), Shaw Group (SGR: 12.06, -0.80, -6.22%) and Australia's Macquarie are similar big players. There are thousands of smaller firms, too. Aqua America (WTR: 18.92, -0.93, -4.68%) provides water and waste-water services to 2.8 million customers. American Superconductor (AMSC: 8.55, -0.53, -5.83%) makes state-of-the-art power cables that can deliver 10 times the juice of existing wires. It's debatable whether individual companies like those, a fund covering them or their competitors, or even an investment at all is the smartest move. That's because there are plenty of risks associated with jumping into the infrastructure space. The biggest being the uncertainty that comes with politics. There's no telling when or if a bill will be passed (and if the country can afford it). In addition, infrastructure projects typically can't get past the drawing board overnight. So even if money is earmarked for these types of projects it may take time before there are any groundbreakings. And the sector tends to be closely linked to energy. A new natural gas pipeline or solar or wind assets sound like great ideas when oil is inching toward $150 a barrel. The talk, though, dies down when the price craters (as it has recently) or energy demands ebb. Of course, there are considerable attributes that counter all that. The Wall Street Journal reported that Lawrence Summers and Robert Rubin, two key Obama economic advisors, seemed to give their support to a stimulus plan during a panel discussion on Monday. The Journal said estimates for the size of a plan are in the $500 billion to $700 billion range. And as unemployment rises, such a plan would be an easy way to put some people back to work. The economy would get a jolt right off the bat in 2009 and (hopefully) benefit in the long run, too. And, of course, energy prices can certainly go right back up. One of the simplest ways to play the infrastructure theme is through a series of funds that own a basket of stocks. You will find, though, that most of the options are "global" in span. That presents a dilemma: Will a globally focused ETF benefit from a U.S.-centric plan? The world's economies are more closely linked than ever. But we think the pop may be muted when only a few holdings in the portfolios are located in the U.S. Of course, the world could follow our lead. Indeed, China recently announced a massive almost $600 billion plan. A globally-focused fund also means you have to do homework on, say, German utility E.ON and try to determine if it's undervalued and the portfolio is, too. The diversification aspect is nice. Remember, though, we are talking about a U.S. stimulus plan, at least for the time being. Kensington Global Infrastructure (KGIAX) and Kinetics Water Infrastructure (KWINX) are two mutual fund options. Fund investors looking for a more narrowly defined play could opt for sector funds like Fidelity Select Construction & Housing (FSHOX). It owns companies like Fluor. But the portfolio also features homebuilders and companies like Home Depot (HD: 18.52, -1.24, -6.27%), so it won't be an infrastructure pure-play. There are also ETFs to consider. The iShares S&P Global Infrastructure fund (IGF: 24.94, -1.17, -4.48%) tracks an index of 77 companies including Macquarie, E.ON, Williams Cos. (WMB: 12.13, -2.40, -16.51%) and Exelon (EXC: 45.19*, -4.04, -8.20%), the latter two being energy companies located here in the U.S. It charges $48 a year for every $10,000 invested. First Trust ISE Global Engineering & Construction (FLM: 21.98, -1.85, -7.76%) has an underlying index of 68 firms. It's geared toward more of the companies that do the dirty work vs. those that run the finished projects. State Street also markets the SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII: 36.03*, -0.97, -2.62%). It primarily invests in utilities. In the end, investors need to weigh whether they are looking for a short-term pop or a long-term holding. A stimulus plan of some sort seems like a done deal. But given the bailout tab the U.S. has already rung up the last few months, it's debatable whether the country can continue to invest in these projects far into the horizon. Indeed, that could make infrastructure a hot sector that quickly cools off. "Infrastructure typically sounds better than it is when it is implemented," says Lawrence Glazer, managing partner of Mayflower Advisors in Boston. |
Posted at 05/9/2008 15:03 by sheeneqa Buy, Sell or Hold: ABB Ltd. By Horacio Marquez Contributing Editor When I coined the term "global synchronic growth" a few years back, I must have had ABB Ltd. (ADR: ABB) in mind. Global synchronic growth is the simultaneous expansion of most of the major economic zones around the world, which spurs investment and creates vast amounts of wealth. Up until now, this development has been largely a consequence of the pro-growth policies adopted by the "Group of Eight," or G8, countries, as well as accelerating growth in the increasingly important "BRIC" economies of Brazil, Russia, India and China. Going forward, however, investors can expect an additional boost from a $40 trillion global infrastructure boom. And one of the biggest beneficiaries from this massive surge in infrastructure outlays will be Zurich-based ABB, a leading global provider of electrical-system services and components. With a market value of roughly $63 billion, ABB is the world's leading builder of power networks, making it one of the real heavyweights in a sector that includes such rivals as America's General Electric Co. (GE) and Germany's Siemens AG (ADR: SI). ABB is truly global in focus. Over the last several months, for example, ABB has announced deals of $233 million in Korea, $74 million in India, $170 million in the Sweden-Finland region, $53 million in Dubai, and $70 million in China, just to name a few. Infrastructure modernization is one area of economic development in which no country with global-growth aspirations can afford to lag. And that's especially true when it comes to power generation, where the consequences of neglect can be huge. Research demonstrates an almost perfect correlation between electricity-demand growth and economic growth. In recent years, we've seen blackouts from Barcelona to Johannesburg, with measurable fallout each time. BRIC economies such as China and India, which are expanding at rates of 9%-10% annually, are consuming massive amounts of additional power to make that happen. Energy is in the headlines every day, with crude oil establishing new record highs virtually every day. In fact, the World Energy Outlook from the International Energy Agency points to China and India as the areas of highest growth in energy infrastructure for decades to come - and ABB is perfectly positioned to take advantage of this. And that's what makes ABB such a great stock, especially right now. Unlike consumer-oriented markets - where a large percentage of the spending is discretionary, and gets cut back when times get tough - infrastructure spending is a virtual necessity, meaning governments and companies cannot cut back on their outlays for roadways, water systems and power-generation-and And we have a huge trend towards urbanization in China and India that will continue strongly, despite the current market turmoil. To give you an idea, China and India will account for 45% of the $22 trillion investment in infrastructure needed to meet demand growth over the next 20 years. And both countries are awash in money that can be deployed into infrastructure projects. ABB is a company of superlatives. They have been in business for 120 years and now lead the world markets in both power-transmission and power-management systems, as well as in industrial-automatio ABB spends as much time focusing on internal improvements as it does on market opportunities. It constantly re-examines its "core competencies" to make sure it remains at the head of the pack, and it also strives to consistently improve its internal operational efficiency. These initiatives are leading to an ongoing expansion in ABB's profit margins. That, in turn, should boost ABB's competitive position vis-à-vis the very few other global firms that have the ability to tackle the massively complex, highly technical power projects that are being built in the emerging markets today. We like ABB's clear commitment to its shareholders. Back in April, the company said that sales growth would average 8%-11% a year for the period from 2007-2011. Profits will advance at an even-brisker 11%-16% during the same period. The company also announced plans to buy back $2 billion worth of its own shares - almost always a positive sign for stockholders. At ABB's annual shareholders' meeting in May, interim Chief Executive Officer Michel Demare said the company is "relatively little exposed" to the global financial crisis and noted that powerful global trends are in place to support the company's business for years to come. The firm's first-quarter revenue rose 17% on a year-over-year basis, and net income reached $1 billion, a jump of 87%. Orders rose 16%, topping the $10 billion mark for the first time ever. ABB still intends to create 20,000 new jobs over the next five years, in order to deliver on those strategic objectives. At Friday's close of $27.37, ABB's shares are down about 18% from their 52-week high of $33.39, and are 34% above their 12-month low of $20.42. In terms of the valuation on ABB's shares, you have to take a very close look at the ultra-low "PEG" ratio (Price/Earnings ratio divided by the Earnings Growth Rate). For a company of this quality, a PEG ratio of 1.0 or less is a steal - and ABB is trading at 0.79! As we noted earlier, ABB should deliver double-digit growth this year, which means that the stock should rally nicely from its current level. The next earnings report is scheduled for July 24, and we're expecting the results to beat expectations. Analysts are anticipating a good quarter and are raising earnings estimates. To be sure, ABB does face some challenges. There's a slowdown in Europe. Authorities in China and India are actively battling inflation, which might cause these economies to slow. However, these slight slowdowns shouldn't affect ABB in a meaningful way, given the huge deficiencies in infrastructure that both these countries face, and the overall global push for additional generating capacity for clean, reliable power. We would advise investors to buy ABB shares up to $30 a share; but given the current market volatility, and the fact that the stock already has consolidated, look for downdrafts in the stock price to establish an initial position or to pick up additional shares. Cautious investors might want to wait and see the results of the quarterly report - if the announcement is close at hand, as it is, now (the risk, of course, is that investors who follow this strategy could well pay a higher price in return for added degree of certainty that comes with knowing the actual results). Action to Take: BUY ABB. Investors should plug into this global supplier of power-generating systems. [Editor's Note: Horacio Marquez was working as a vice president of the Merrill Lynch Emerging Markets Fixed Income Group in 1994 when he correctly predicted that both Argentina and Mexico were headed for currency crises - cementing his reputation as an expert on both the emerging markets and on the nuances of global Cutting-edge power cable from ABB Sept. 5 - ABB's high-voltage power cable factory in Sweden is one of the most modern cable factories and has supplied dozens of power projects around the world, including the 580-km link that now connects the power grids of Norway and the Netherlands. NorNed, the world's longest submarine power link, passed operational tests at the end of June. |
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