Narrower focus will pay off for these two

Article Excerpt

In the past few years, activist investment firms have pressured ABB and BHP to sell their unprofitable operations. That has freed up cash for share buybacks and dividends. ABB LTD. ADRs $20 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.1 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for electrical utilities. It also produces automation systems and robotics for industrial clients. In response to pressure from activist investor Cevian Capital, ABB has agreed to sell its power grid business to Japan’s Hitachi Ltd. The power grid division accounts for 30% of the company’s overall sales, but is much less profitable than ABB’s other segments. Hitachi will pay between $7.6 billion and $7.8 billion for an initial 80.1% stake. ABB plans to use the proceeds to buy back its shares. The company expects to complete the sale in the first half of 2020. ABB also has…