InvestNow News 30th Aug – Antipodes – Siemens: Quality and growth, without the headlines

At Antipodes, we look beyond the headlines and explore less obvious parts of the market in order to find true value and growth.This is particularly important in the market we are currently faced with.

It’s a market relentlesslyreaching for structural growth and quality at any price, while cyclical sector valuations have rarely traded on lower multiples.

The reality of persistently low real rates is that the adoption of disruptive technologies accelerates as cheap funding flows to moon-shot style projects with a distant payback – hence, many mature cyclical businesses are cheap for a reason.

But some cyclical stocks may be hiding cheap secular growth opportunities, which could prove lucrative for investors, given how expensive secular growth stocks have become.

A COMPLEX CONGLOMERATE OR IRRATIONAL EXTRAPOLATION?

Historically, the market narrative has focused on Siemens as a relatively complex conglomerate unwilling to evolve. However, the pressure for change is building.

Of Siemens’ nine prior operating divisions, all but two are global top three in their respective industries, most of which are oligopolistic in nature. These high-quality assets have long stood in stark contrast to the low valuation that has been afforded to the equity of the overall group of around 13 times normalised fiscal 2019 earnings.