by Chuck Carlson, editor DRIP Investor
Technology and health care are two of the more attractive sectors for long-term investors. Agilent Technologies
) gives you quality exposure to both industries.
company provides measurement and testing equipment used in a host of
industries, including communications, electronics, chemicals, and
healthcare & life sciences.
Pro?ts are expected to be a record this year, and the company's
long-term growth should exceed the growth rate of the overall economy.
shares have pulled back sharply in recent months and are trading at a
21% discount to their 52-week high of $46.72. The price dip is providing
an excellent entry point for investors who want a solid growth
opportunity at a reasonable valuation.
Agilent provides testing
and measurement instruments used in a variety of environments, from
life- sciences laboratories and wireless communications to chemical
analysis and aerospace/defense.
The company has broadened its
product line via acquisitions in recent years, including the acquisition
of Varian in 2010. Its most recent acquisition was the June 2012
purchase of cancer-diagnostics company Dako.
In addition to acquisitions, Agilent's growth strategy hinges on
creating cutting-edge products. To that end, the firm spends roughly 9%
of annual sales on research and development.
Pro?t growth should
be decent this year, with per-share pro? ts for ?scal 2012 ending in
October expected to rise 10%. Growth in ? scal 2013 should accelerate to
14%, paced by improving U.S. economy.
The stock currently
trades at 11 times the ?scal 2012 consensus earnings estimate of $3.24
per share and 10 times the ?scal 2013 estimate of $3.71 per share.
Those seem to be very reasonable earnings multiples for a company growing its bottom line at double- digit rates.
growth should provide a nice boost to the dividend over time. Agilent
initiated a quarterly dividend of $0.10 per share earlier this year, and
I would expect dividends to grow 5%-10% annually over the next ?ve
Agilent stock has not behaved all that well over the last
four months. Investors seem anxious about the U.S. economy and remember
that Agilent had a particularly rough go of it in 2009, when the
recession bit hard on testing ?rms.
However, I don't expect the
economy to slump into a 2009-like funk and actually see economic
activity accelerating a bit by year-end.
That should dispel
investors' fears of a "double dip" recession and fuel better investor
support for Agilent shares. Downside seems limited to the $32-$34 level.
The stock traded in the mid-$50s in 2011, so there is plenty of upside.
Please note that Agilent recently initiated a direct-purchase
plan. Any investor may buy the ?rst share and every share directly from
the company. Minimum initial investment is $500.
waive the minimum if an investor agrees to automatic monthly investment
via electronic debit of a bank account of at least $50.