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Power Up Your Portfolio with ABB

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August 18, 2008 – Comments (3) | RELATED TICKERS: ABB

Power Up Your Portfolio with ABB

I am familiar with ABB and have looked at it in the past, but I hadn't realized how cheap it has gotten until it was mentioned in this week's Barron's. I guess that I shouldn't be all that surprised given the pounding that most infrastructure stocks have received lately. For those of you who are not familiar with the company, ABB is a Swedish company that manufacturers equipment for power transmission and distribution.

Despite posting outstanding quarterly numbers, including 35% earnings growth, 27% revenue growth, and a 31% increase in its backlog, ABB's share price has dropped 23% in the past three months and 15% since its earnings report in late July. ABB is now trading at a mouth-watering 14 times its estimated 2008 earnings and 12 times its estimated 2009 earnings. A company that's growing at 30%, but trading at a multiple of only 14 sounds pretty good to me.

ABB is cheap right now because everyone is afraid that the global economy is going to implode and that no one will ever build anything again. While growth is clearly slowing in many western markets, emerging markets like China and India are still experiencing tremendous growth and more than half of ABB's revenue comes from emerging markets.

Furthermore, ABB is heavily involved in the wind power, the current trendy alternative energy play. ABB provides 30% of the equipment that is needed to build a new land-based wind farms and 40% of the gear for offshore farms.

I don't see how ABB won't outperform the major indices for the next several years. I'm adding shares of ABB to my CAPS portfolio today.

Deej
No position in ABB

3 Comments – Post Your Own

#1) On August 18, 2008 at 12:57 PM, Tastylunch (29.29) wrote:

Makes sense to me, even with a global slowdown they should do alright. Chances are they will just gain market share. Thanks for the info Deej

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#2) On August 18, 2008 at 4:09 PM, anchak (99.84) wrote:

I like Asea Brown Boveri too....That's what , the initials stood for anyway.

They are big in Asia ( especially India and China)...yes I think this is worth looking into.

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#3) On October 21, 2008 at 7:48 PM, crichton1 (< 20) wrote:

ABB has good core business but a lousy investment department that squandered most profits (check its cashflow statement).  I hope they've learned and concentrate more on their industry.

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