ABB Group Delivers Stable Returns Without The High Price Tag

Feb.29.12 | About: ABB LTD. (ABB)

Quite often, investors look for stocks that represent the hottest, newest trend in financial success. We all know that Apple is improving all the time because of their innovative successes and unique hold on the consumer mind. But that consistency we love comes at a price when we look at hot stock like Apple (NASDAQ:AAPL) or Google (NASDAQ:GOOG). We are going to look at a company which has defined the word 'consistency' for over a century:

ABB Group (NYSE:ABB) focuses on innovation to ensure they are always ahead of their competitors. If you look at recent news stories, you'll see that ABB is using the words "sustainable" and "renewable," as well as popular phrases like "helping avoid annual emissions". In a nutshell, ABB is a company that improves the efficiency of power companies, grids, and transfer through innovative engineering. Do you have goose bumps yet? Not only are they focused on technological improvements, they are using the buzzwords of the future.

But since this is supposed to be about history, let's talk about ABB's past. The beginnings of ABB were in Stockholm, Sweden, with an electrical lighting and generator company in 1883. Somebody said "electricity," and founder Ludvig Fredhom started producing innovations under the company ASEA. ABB's history is peppered with inventors and innovators, and not just in Sweden. On the other branch of the ABB family tree is Brown, Boven & Cie [BBC] in Switzerland, establishing high-voltage power transmitters as early as 1981. The first steam turbine in Europe (1901), patents for uniquely efficient turbine rotors (1933), and the largest self-cooling transformer (1932) are all in ABB's past. By the time ASEA and BBC merged in 1986, both companies had solid histories to bank on.

And today? ABB is a huge multinational company. They win contracts with national governments from Norway to China, delivering energy innovations that save hundreds of thousands of tons of CO2 from being delivered into the atmosphere while saving billions of dollars for their clients.

If I had a million dollars, I'd put it all into ABB stock. Why? I'd bet a fortune on the simple fact that these guys have been doing everything right for longer than most companies have been publicly traded. The best part of ABB for small and large budget investors is that their stock trades at just under $21 per share, with a trading volume of well over 1 million.

The stock market tells a great story about ABB, too. Their stock price has been ticking slowly upward over the past six months, with a few dips and pitfalls along the way. On the year, ABB stock is actually down, which means now is a great time to buy. The 52 week range is from about $16 to about $27, which means we're in the middle now. In my opinion, you can't do much better than this for long-term stock investments.

But that's because I'm a long-term kind of investor. Of course, you can invest in the flashy and quick stocks, attempt to make a quick bundle on a new company that may or may not suddenly double in value. There are plenty of people out there who are just waiting for Facebook to step onto the market so they can get their piece and watch it grow. Not me. I have some time, and I have some Apple stock in case I need some cash. My ABB investment is going to pay for my retirement.

I don't expect ABB to make any dramatic moves, up or down, in the near future. What I do know is that the news about ABB is always good. On February 27th of this year, ABB won a contract to update for the power grid in the state of Michigan, a $90 million order. It seems like every time I check my stock in ABB, a new story of a winning bid is being reported.

You're probably wondering what ABB is up against. Are there any competitors in the market of large-scale energy infrastructure innovation? Of course there are. ABB's major competitor is probably a familiar name: Siemens AG (SI). Siemens trades at just about $100 per share, but the company is looking at a rough few months coming up.

Profits in Siemens' four major units fell in the final quarter of 2011, spurring comments from the CEO about making some changes and buckling down. Their stock price fluctuates by a healthy $60 on the year, and they are not at the low end yet. Siemens is also staring down a wage hike demand from unionized workers in Germany. Good for the workers, bad for the stock price.

Another major competitor, Emerson Electric Co. (NYSE:EMR) has seen no increases over the past three months. Emerson has been much more volatile, too, with a fluctuation of one third to 50% of its value in 52-week range. ABB is an inexpensive stock that is dependable. In the long term, they have shown they can stay settled into their cash flow without losing the profits that get them great numbers.

While ING Group downgraded ABB to Hold in mid-February, I think that as long as you have the long view on your stock, buying now will not be a terrible investment. You could wait for the stock to drop a bit, but overall, you will probably see things get better for ABB. The revenue that ABB is pulling in increased by 16% from last year in the fourth quarter of 2011.

For a calm stock from a company that has a long, rock solid history, you can't beat ABB. Their size and rate of success is backed up by the fact that their business is efficiency. When ABB decides to reduce costs, they do it by becoming more efficient and more profitable. I recommend buying ABB as a long term investment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.