From top-down to bottom-up
Bottom-up stock calls
In this report we highlight accordingly our top five bottom-up stock picks (four Buys and one Reduce),
on pp6-10. And we are, moreover, making three rating changes: upgrades for ABB, Assa Abloy and
Atlas Copco.
ABB (ABBN VX): upgrade to Hold (target price CHF22.00) from Reduce (CHF18.00)
We upgrade ABB to Hold from Reduce on, firstly, the return of former CFO Peter Voser as Chairman on
30 April (announced 18 December 2014): we believe Voser’s chairmanship improves the likelihood of
what we see as an overdue portfolio review. Secondly, Q1 earnings beat our expectations, by 4% at the
EBIT ex-items level. Lastly, on 4 June it was disclosed that activist shareholder Cevian Capital has taken
a 3.1% stake. Cevian now joins the Wallenberg family investment vehicle Investor as a strategic buyer
(Investor’s stake had grown to 9.3% as at 29 May from 8.6% at the end of 2014 and 8.1% at the end of
2013). We raise our target price to CHF22.00 from CHF18.00 previously. See pp22-25.
Assa Abloy (ASSAB SS): upgrade to Buy (target price SEK185) from Hold (SEK176.67)
We upgrade Assa Abloy to Buy from Hold on the simultaneous recovery of both organic revenue growth (5%
in Q1 2015, the best performance since Q2 2011) and inorganic revenue growth (thus far in 2015 the group has
announced six deals adding a total of SEK1.3bn of revenues, compared with two deals adding only SEK0.3bn
for the comparable period in 2014). The stock has, moreover, has seen 5% profit-taking since the Q1 earnings
on 28 April. We raise our target price to SEK185 from SEK176.67 (pro-forma for the recent 3:1 stock split).
See pp33-36.
Atlas Copco (ATCOA SS): upgrade to Buy from Hold (target price unchanged at SEK290)
We upgrade Atlas Copco to Buy from Hold as a result of the 13% profit-taking the stock has seen since
Q1 earnings on 28 April. Our target price is unchanged at SEK290. See pp37-40.