Secular Growth Themes Will Help Industrial Stocks Withstand Recession Concerns; We Prefer Schneider

A selloff in equity markets, amid fears of a global recession, presents a buying opportunity in several high-quality European industrial stocks, which we anticipate will be able to withstand a potential recession thanks to their exposure to secular growth themes. ABB, Schneider Electric, and Siemens, all wide-moat stocks, have each seen 10% wiped off their share prices since Aug. 2 and are currently trading in undervalued territory on Aug. 5. These businesses are the picks and shovels of several long-term growth themes such as decarbonization and an acceleration in data center investments to support artificial intelligence usage. These are multiyear secular themes that will continue to drive robust levels of investment irrespective of the economic environment to achieve environmental targets and efficiency gains. Schneider Electric is our preferred pick, currently trading at a 10% discount to our EUR 208 fair value estimate.