BOB MILLEN
CO-OWNER
JENSEN INVESTMENT

COMPANY: Emerson
TICKER: EMR (NYSE)
PRICE: $86.33 (as of 4 p.m. yesterday)
52-WEEK RANGE: $61.47-$90.42
MARKET CAPITALIZATION: $35.6 billion

Bob Millen is one of the owners of the firm Jensen Investment, which manages high-net-worth individual and institutional accounts and a mutual fund, the Jensen Portfolio. Jensen Investment is located in Portland, Ore. Emerson is in St. Louis, Mo. Mr. Millen spoke with Katharine Herrup of The New York Sun about why Emerson’s stock could increase to $100 over the next year.

What does the company do?

Emerson does two things. They design and manufacture a broad range of electrical products and systems for the industrial and commercial consumer markets. The company has been around for a long time and years ago they used to sell TVs and radios. They provide the components or inner workings of telephones and cell phones.

Where their big money is is in industrial.They put together climate technology – heating, air conditioning, etc. They do industrial automation, which means they put together systems that help run manufacturing plants. That’s really the second big area that they are known for. In the last 10 to 15 years, Emerson has become known as a totalsolutions provider. They will help the manufacturer put together plans to run the plant more efficiently through the electrical and automated systems that they provide.

Why do you like the stock?

It’s the historic consistency and their outlook for the future.

It’s been a very consistent earning company and a company that consistently pays a dividend. We like it because they have technology that gives them competitive advantages and the competitive advantages lead to pricing power, which leads to staying power, which leads to consistency. The minimum requirement we have is a 15% return on equity for each year. Emerson has done this for more than 10 years.

We also like Emerson’s prospect not only in the United States, but also developing countries. One of the keys for developing countries like India, China, Russia, and Brazil is that they really need to build up their infrastructure – all the way from manufacturing plants and power plants to bridges. Emerson, we believe, will play a very important role in helping the companies in those countries run efficiently. Emerson has 40% of its revenues right now from outside the U.S., and the rate of growth in those countries will be greater than the rate of growth in the U.S.

What do you think the stock is worth? Do you expect its value to increase?

I wouldn’t be surprised if it goes over $100 next year.

Is it a good time to buy?

Well, we believe it is. It’s always good time to buy a high-quality company’s stock, especially if you’re going to hold it for a long time. It’s one of the more unique times to buy Emerson stock because the market is underpricing, in general, high-quality growth companies, Emerson being one of them. We believe you really have to be in the market for the long term in order to invest well. We’ve probably owned Emerson for at least five years.