Motley Fool: Automation solutions brighten Emerson future

Don’t let its name confuse you: Emerson Electric (NYSE: EMR) isn’t a utility. Founded in 1890, it is primarily an automation solutions provider that serves nearly every industry you can think of. The company operates another big segment – commercial and residential solutions – which provides appliances and services related primarily to heating, air conditioning, ventilation and refrigeration. Its market value was recently north of $40 billion.

Emerson has had to deal with sluggish industry conditions for quite a while, which has resulted in a contraction in sales for the company. Yet in its most recent quarter, it turned things around, enjoying 10 percent sales growth and remaining largely consistent with what executives had hoped to see.

Automation solutions are gaining in popularity, and Emerson believes that growth there and in the commercial and residential solutions market should accelerate into 2018. (A strong foothold in automation means Emerson already has a presence in hot markets such as the Internet of Things.) If that proves to be the case, then Emerson could be in line to rebound from weakness, and that could add share-price gains to the dividend income that investors already receive from the stock.

The company’s dividend recently yielded 3 percent, and it has been increasing its payout annually for more than 60 years. (The Motley Fool has recommended Emerson Electric.)

Ask the Fool

Q: What is “earnings season,” and when is it? – W.S., Worcester, Massachusetts

A: Public companies (those with publicly traded stock) are required to report on their earnings and financial condition in three quarterly “10-Q” reports and in an annual “10-K” report for their fourth quarter. They can structure their fiscal year as they want, and while many companies end their years at the conclusion of December, others choose the end of March, June or September.

Earnings reports are typically issued a few weeks after the end of the quarter, so gobs of American companies release their reports from early January through February, from early April through May, from early July through August and from early October through November. These are the four “earnings seasons.” They’re of interest to many investors because they offer new, fresh data on companies, and analysts and commentators will often issue revised opinions on companies after earnings reports.

Stock prices can also rise or fall following an earnings report, when results are better or worse than expected. For best investing results, learn to read and understand financial statements yourself – and keep up with your holdings’ earnings reports.

Q: Are there any index funds that are focused on the world outside the U.S.? – T.C., Tulsa, Oklahoma

A: There sure are, offered by many companies. Vanguard, for example, offers its Vanguard FTSE All-World ex-U.S. Index (VFWAX, VEU), covering the whole world market except the U.S., while its emerging markets index funds (VEMAX, VWO) focus on developing economies, which can grow rapidly while being riskier. There’s also the Vanguard European Stock Index (VEURX) and Vanguard Pacific Stock Index (VPACX), among other possibilities, and the Vanguard Total Bond Market II Fund (VTBIX) gives you global bonds.

My dumbest investment

In the early 1980s, when I was in my early 20s, I knew very little about stocks. A guy called me, saying he was a vice president at a well-known investment company and he had an opportunity for me – a great stock that would make me a lot of money. That was the first stock I ever bought. Two months later, I called the investment company and found out that the company I’d invested in had declared bankruptcy; I had lost all my money, and the guy who had called me no longer worked for them. I did not know anything close to what I know now.

Now I can do some fundamental and technical analysis of stocks. These days, I read charts and pay little attention to fundamental data, as I am working on day-trading for a living. – R.R., Richmond, New Hampshire

The Fool responds: Beware of any cold calls from brokers pushing stocks and other investments. Great opportunities are not peddled that way. And think twice before day-trading, too, as it’s very risky. One study found that 80 percent of active traders lost money and only 1 percent of them could be described as predictably profitable.

We favor long-term investing and fundamental stock analysis, studying companies’ revenue, earnings, profit margins, debt and cash levels, competitive advantages and so on, instead of trying to draw meaning from charts of stock-price movements.