What is the stock?

Headquartered in Germany, Siemens manufactures a wide variety of industrial products.  It has leading positions in a variety of markets centered on electrification and power, thermal power plants, wind, building automation, and health care imaging equipment. 

How long have you held the stock?

Siemens is one of the top 10 holdings in the Templeton Global Growth Fund. We’ve held the stock for a long time. However, we’ve recently significantly increased the holding in the portfolio and it currently comprises 2.4%. 

What do you like about it?

The valuation is attractive at 14x P/E. The company floated 15% of subsidiary Siemens Healthineers in March 2018, which is now trading on 22x P/E; the remaining 85% stake makes up one-third of Siemens market capitalisation. If you exclude Siemens Healthineers from Siemens’ overall market value, you’re only paying around 11x P/E for the rest of the business. 

How is it better than its competitors?

Siemens’ Digital Factory Division, which currently makes up 25% of the group’s total profits, continues to be the company’s biggest success. Its best-in-class automation offering ranges from product design and manufacturing to software content, offering long-term growth and improving profitability, while adding value for its customer base. This differentiates it from competitors. Profits in the Digital Factory Division are up 50% in the last two years, and it is posting very strong organic growth. The Division now contributes around one-third of overall company profits (excluding Healthineers) and is starting to meaningfully contribute to overall business growth.

What do you like about its management?

We like that the management team has achieved the majority of its targets in its restructuring program. Management is continuing to focus on costs and efficiency and also selling various non-core assets in order to simplify the group, which should help to narrow the conglomerate discount over time.

How much has it added (subtracted) to your overall portfolio over the last 12 months?

The shares have declined slightly over the last 12 months. However, as long-term value investors, we remain confident in Siemens.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.