Tag Archives: Emerson Electric

Business, Finance, Occupation & Industry

An Island of Sanity in a Volatile Market

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By Chuck Saletta, The Motley Fool

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As the market zigzagged over the past couple of weeks, the real-money Inflation-Protected Income Growth portfolio just kept humming along, collecting dividends and buying shares. Since the last general update near the end of March, the portfolio is up a couple hundred dollars, which isn’t bad given the near-daily whipsaw it feels like we’ve been riding recently.

The secret to the portfolio’s success isn’t much of a secret at all. Instead, it’s a time-tested approach to investing inspired by Benjamin Graham, the father of value investing and the man who taught investing to Warren Buffett. By combining the benefits of dividends, valuation, and diversification into one single vehicle, the iPIG portfolio is designed to let the companies behind the stocks, not the market‘s daily fluctuations, drive the investment returns.

So what did happen?
While the overall message was one of relative calm, the market‘s machinations did provide the iPIG portfolio the opportunity to pick up shares of Emerson Electric . As a company with over 55 years of consistently rising dividend payments, it’s a natural fit for a portfolio that seeks to invest in an increasing income stream. Yet until the market was so kind as to knock down Emerson’s price to a more reasonable level, it was simply too pricy to justify buying.

Additionally, Becton, Dickinson made good on its dividend pledge, handing the iPIG portfolio $8.91 for the 18 shares it holds ($0.495 per share). That was the second consecutive dividend by Becton, Dickinson at that level. Should the medical device titan follow recent trends, I anticipate that it could increase its dividend near the end of the year for its December payment.

Not to be outdone, Genuine Parts also continued its long streak of paying and increasing dividends. The iPIG portfolio picked up $12.36 for its 23 shares ($0.5375 per share). That was Genuine Parts‘ first dividend payment at its new higher rate, and like Emerson Electric, Genuine Parts can celebrate more than 55 consecutive years of increasing dividends.

Finally, Union Pacific kept moving money into the iPIG portfolio’s pocket, handing the portfolio $4.14 for the six shares it holds ($0.69 per share). As with Becton, Dickinson, that was Union Pacific‘s second dividend at its current level. Should that railroad giant keep with its pattern, it’d be on track to raise its dividend near the end of the year, as well.

And what comes next?
None of the companies in the iPIG portfolio are expected to pay dividends in the next week or so, but the portfolio still has a touch more than $3,000 in cash that it can deploy. About half of that is in a limit order waiting to see if the market will offer another opportunity to buy the stock that might get away. The other half? It’s available if the market offers up another compelling opportunity like it did last week with Emerson Electric.

To follow …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Emerson Electric's Stock Is Worth Owning

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By Chuck Saletta, The Motley Fool

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The next selection for the Inflation-Protected Income Growth Portfolio is electrical equipment and industrial engineering services giant Emerson Electric . A pretty well-diversified business, yet one that rarely succumbs to the conglomerate discount, Emerson’s stock had been priced a little too high to earn a position in this portfolio. Its recent pullback from that peak brings it back into the iPIG portfolio’s buy range.

A long-tenured member of the dividend growth club, with over 55 years of increasing dividends, Emerson is a business with a proven history of rewarding investors for the risks they’re taking by owning the stock. While the past isn’t a guarantee of the future, a track record like that demonstrates an incredibly strong foundation that has been able to withstand wars, recessions, and the recent financial meltdown.

Why it’s worth owning in the iPIG Portfolio
To earn a spot in the portfolio, a company has to pass a series of tests related to its dividends, its balance sheet and valuation, and how it fits from a portfolio diversification perspective.

Dividends:

  • Payment: The company’s dividend currently sits at $1.64 a share, a yield of about 2.9% based on Wednesday’s closing price.
  • Growth history: The company has raised its dividend annually for over 55 years, with increases dating back to 1956 
  • Reason to believe the growth can continue: With a payout ratio of 58%, the company retains better than 40% of its earnings to invest for future growth. That reasonable payout ratio also gives the company flexibility to maintain its dividend if future growth doesn’t materialize as quickly as hoped

Balance sheet and valuation:

Balance sheet: A debt-to-equity ratio of around 0.5 indicates that the company does use debt, but it hasn’t overleveraged itself to the point where a near-term financial hiccup would derail it.

Valuation: By a discounted cash flow analysis that has been updated to reflect the most recently reported quarter, the company looks to be worth around $42.9 billion. That makes its market cap of $40 billion seem reasonable.

Diversification fit:
The previous picks for the portfolio included:

As a fairly diversified and industry-focused business, Emerson Electric touches many of the same lines of business as several other iPIG portfolio picks, which makes it less than ideal from a diversification perspective. Still, from a diversification perspective, a little overlap in a lot of places is better than owning nearly identical businesses. It may not be perfect diversification, but it’s all part of the balancing act needed to manage across risks in investing.

Why pick it over its peers?
Still, as Emerson is only one of several …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Here's What This $3 Billion Hedge Fund Has Been Buying

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By Selena Maranjian, The Motley Fool

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Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at the Eminence Capital hedge fund company run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks when he finds ones he expects will decline.

The company’s reportable stock portfolio totaled $3.4 billion in value as of Dec. 31, 2012.

Interesting developments
So what does Eminence Capital‘s latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are State Street and Rockwell Automation. Other new holdings of interest include Emerson Electric . Emerson Electric, which recently yielded 2.8%, has seen its performance pressured by Europe‘s troubles and a stronger dollar. In its last reported quarter, revenue was up 5% and EPS up 24%, with management noting that, “Recent order trends suggest market conditions have stabilized and may be poised for improvement, particularly in the emerging markets.” Some Wall Street analysts see it as undervalued, but our own analysts question that, expecting slower growth.

Among holdings in which Eminence Capital increased its stake were EMC and NetApp . EMC is a $52 billion storage giant, positioning itself to profit from the rapidly growing cloud-computing and “Big Data” arenas. It also holds an 80% ownership stake in virtualization specialist VMware, though VMware’s dominance in its market may mean slower growth in the future. EMC‘s recent earnings report was solid, featuring strong operating income growth, and many were excited to hear about its plans to launch a joint venture with VMware called Pivotal, combining their cloud and data analytics services. Pivotal is expected to be spun off as a separate company in the future.

With a market cap of $12 billion, NetApp is a smaller rival of EMC and one that has posted strong results recently, with the promise of more as its competition shrinks. Some wonder whether NetApp will end up being acquired by a bigger fish, such as Oracle, another key player in data.

Eminence Capital reduced its stake in lots of companies, including American International Group . AIG has become a hedge fund darling, but it’s not the best-performing insurer. My colleague Matt Koppenheffer worries about AIG‘s tendency to not plan sufficiently for the future, and fellow Fool Morgan Housel recently interviewed the company’s high-profile former CEO, Hank Greenberg.

Finally, Eminence Capital‘s biggest closed positions included Abbott Labs and Ralcorp Holdings, which was acquired by ConAgra. Abbott has just split its pharmaceutical business from its nutrition and devices businesses. The new pharmaceutical entity is AbbVie, starting out with about $18 billion in annual revenue but also a lot of debt. Some worry that AbbVie is too dependent on its $8 billion drug Humira, which faces patent expiration, though growth in emerging markets may make up …read more
Source: FULL ARTICLE at DailyFinance