Does Siemens Belong in Your Portfolio?

With shares of Siemens (NYSE:SI) trading around $132, is SI an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Siemens is an integrated technology company with activities in the fields of industry, energy, and health care. Siemens operates in six segments: industry, energy, health care, equity investments, Siemens IT solutions and services, and Siemens financial services. The company has equity investments in telecommunications infrastructure and household appliance companies as well as in a company that provides open communications, network, and security solutions.

Engineering giants Siemens of Germany and Mitsubishi Heavy Industries of Japan reacted quickly to General Electric’s (NYSE:GE) sweetened bid for France’s Alstom SA, raising their own combined offer by more than 1 billion euros (dollars.) The two companies said in a statement Friday they were raising their cash offer by 1.2 billion euros ($1.63 billion) to 8.2 billion euros, which increases their overall valuation of Alstom’s energy business by 400 million euros to 14.6 billion euros. Siemens hopes to acquire Alstom’s gas business entirely, while Mitsubishi would take a 10 percent stake in Alstom under their proposal. GE, meantime, has bid 12.35 billion ($17 billion) for Alstom’s entire power business. On Thursday, it added new guarantees on sensitive concerns over jobs and decision-making, while leaving the cash value unchanged.

T = Technicals on the Stock Chart Are Strong

Siemens stock has been moving higher over the last couple of months. However, the stock is currently pulling back and may need time to stabilize. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Siemens is trading above its rising key averages which signal neutral to bullish price action in the near-term.

SI

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Siemens options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Siemens options

15.96%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Siemens stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Siemens look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

19.97%

24.53%

-22.84%

11.36%

Revenue Growth (Y-O-Y)

5.22%

0.29%

2.59%

-10.15%

Earnings Reaction

0.07%

1.41%

1.13%

0.44%

Siemens has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Siemens recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Siemens stock done relative to its peers, General Electric (NYSE:GE), ABB (NYSE:ABB), Phillips (NYSE:PHG), and sector?

Siemens

General Electric

ABB

Phillips

Sector

Year-to-Date Return

-1.02%

-4.03%

-12.70%

-15.10%

-7.21%

Siemens has been a relative performance leader, year-to-date.

Conclusion

Siemens provides a range of valuable technology products and services to a number of industries around the world. The company and Mitsubishi Heavy Industries of Japan reacted quickly to General Electric’s bid for France’s Alstom, raising their own combined offer by more than 1 billion euros. The stock has been moving higher over the last couple of months, but is currently pulling back. Over the last four quarters, earnings and revenue figures have been increasing, which has left investors pleased. Relative to its peers and sector, Siemens has been a year-to-date performance leader. Look for Siemens to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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