Investing in the future of industries
Shares of ABB have lost nearly 20% in just six months, and it's odd that the market doesn't see value in the Swiss conglomerate yet. If there's one industrials play on futuristic technologies like automation and robotics, it's ABB.
Part of the weakness in ABB shares might be because the company's latest numbers for its fourth quarter failed to live up to analysts' expectations. There's nothing wrong with the company, though. ABB wrapped up a strong fiscal 2018 with orders and revenue growing 8% and 4%, respectively. Robotics and motion was the strongest segment with 12% growth in revenue -- encouraging given that it is also a high-margin business for ABB. Its other divisions, electrification products and industrial automation, performed well, too.
The biggest development of 2018, however, was ABB's decision to divest its power grids business. The segment has been a laggard in ABB's portfolio -- one of the biggest reasons for its margins trailing those of its peers. While the divestment is still months away, ABB is restructuring its portfolio further to become more business-to-business focused, catering to digital industries. Think the Internet of Things, robotics, and industrial automation. In February, ABB also partnered with Dassault Systemes to expand its reach into factory automation and robotics, as well as smart buildings.
I believe its strong foothold in a growing industry, encouraging medium-term goals, and strong financials that support a hefty dividend yield of 4.3% make a compelling investing thesis for ABB's stock at current prices.
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