PHILIPS ELECTRONICS N.V. ADRs $35 - New York symbol PHG

PHILIPS ELECTRONICS N.V. ADRs $35 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 913.3 million; Market cap: $32.0 billion; Priceto- sales ratio: 1.0; Dividend yield: 2.8%; TSINetwork Rating: Average; www.philips.com) gets 41% of its revenue by making health care products, such as X-ray and magnetic resonance imaging (MRI) scanners.

The company also makes lighting (36% of revenue) and consumer electronics, such as appliances and electric shavers (20%). Licensing revenue and other services supply the remaining 3%.

Philips continues to benefit from a major restructuring plan that includes efficiency improvements and cutting 4% of its workforce. The company has also sold its less profitable video and audio products business, which makes TV sets and CD players.

Thanks to these moves, Philips earned 1.2 billion euros, or 1.27 euros per ADR, in 2013 (1 euro = $1.52 Canadian; each ADR represents one Philips common share). In 2012, it lost 77 million euros, or 0.09 euros per ADR. Revenue fell 0.5%, to 23.3 billion euros from 23.5 billion. Excluding acquisitions and the impact of exchange rates, revenue gained 3%.

Another part of Philips’ growth plan involves expanding in developing areas like Asia and Latin America. In 2013, its revenue in these markets rose 11% and accounted for 36% of the total.

Philips spends 7.5% of its revenue on research, which helps it keep developing innovative products. For example, it recently launched its energy-efficient EPIQ ultrasound system, which produces medical images that are sharper than current scanners.

The company will probably earn $2.24 per ADR in 2014, and the stock trades at a reasonable 15.6 times that estimate. The $0.98 dividend yields 2.8%.

Philips is a buy.

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