The Case for Siemens (NBB)
IBattered as this conglomerate might be, its health care and tech businesses tell a solid value-story in uncertain times.
It’s romantic to think glitzy delivery systems win wars. The fighters. The bombers. The bullets. The submarines. That’s where the crash and boom can be heard. But real victory comes from the boring hum of manufacturers making things that win battles. So it will be the Covid Wars: The flashy Web middlemen of Amazon and Netflix might seem alluring as markets restructure for wartime.
But long term, it will be the companies that have the muscle and means to get things made. And if there is one operation that is primed to be the Covid Munitions company of the gods it is the Munich-based industrial giant Siemens.
It’s health unit, Siemens Healthineers is a market leader in medical equipment like ventilators, pulmonary image gear and triage systems that hospitals will need to manage the coming avalanche of covid cases. Despite that, Siemens equities have been bashed and bruised: Its stock is trading down a numbing 40% to a low-to-date of about $70 a share.
It’s hard to see the rationale for the collapse. This is a solid global conglomerate, with gross margins that run around 30%, healthy cash flow from operations and a dividend of about 3%. There is also an attractive software business, Siemens Digital Industries, that works in growth areas like media.
Certainly, Siemens remains a maker of “stuff.” And making stuff can be a tough business in a world that can't decide what a barrel of oil is worth. The recent collapse in crude prices was especially cruel to Siemens. There will be challenges as it has to work through supply chain disruptions to get the goods it needs to make its products. But these are the people who have been figuring out to get things done since since Werner Von Siemens started his business in 1847.
If Siemens can't get anything made, the world has bigger issues.
n a world where hospitals will install healthcare equipment on unprecedented scale, this $71 billion conglomerate makes some of the best imagining and pulmonary gear available. And somehow its price-to-earnings ratio is floating 5.55 per share. Candy stores are more valuable than that.
We have never seen market conditions like this. Siemens stock is going to be sweet indeed.
