Schneider (XPAR:SU)’s key businesses include operations in low-voltage and building automation, discrete and process automation, critical power and cooling, and medium voltage and grid automation. Given that emerging markets make up nearly 45% of Schneider’s sales, some may be worried that potentially slowing economic growth in many developing countries would negatively affect the company’s businesses, especially those which are construction-driven. Additionally, the company has a penchant for mergers and acquisitions, which can carry risks of overpayment as well as integration and execution uncertainties.
We believe these risks are more than fully reflected in Schneider’s share price. Among other positive attributes, Schneider has generated high returns on incremental capital and possesses a reasonably healthy balance sheet with strong free cash flow.
From the Brandes Global Equity Fund letter for the year ended Sept. 30, 2015.
