One to Watch: Powerful performer

EMERSON is a best-in-class industrial company based in the United States. Despite the still difficult market conditions, Emerson has performed very well, maintaining its strong market positions in power generation, process controls and air conditioning.

The company generates on average 5 per cent to 7 per cent sales growth over an economic cycle. As the world economy recovers, we can expect Emerson's sales growth to accelerate as gross domestic product growth improves.

The company expects the growth rate of emerging markets to be twice the run rate of mature markets and its 30 per cent exposure to this area reflects this view – a very high percentage in a large industrial company.

Emerson is well positioned to exploit another growing trend in the area of network power. This involves the management of power in data centres for corporates and internet service providers. The demand for bandwidth has led to increased demand for servers and storage, which is growing at a huge rate. Emerson has market-leading technology and is well placed to capitalise on this theme.

Finally, the company is also a market leader in the area of process controls. These are used in areas of manufacturing such as chemical plants and refineries. Process controls monitor manufacturing systems to ensure the right materials are delivered at the correct temperature at the right time.

Emerson is very well financed and has a 50-year track record of dividend increases. Return on capital has been very strong over the years with strong cash generation. It remains a compelling one to watch.

Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.

Rok

42.75p +1.5p

Broker says ADD

ALTHOUGH Rok has retained the slogan "The nation's local builder", most of its earnings now come from maintenance services rather than construction, according to Evolution Securities.

Evolution added: "Rok has addressed the downturn in the private sector and impending squeeze on public spending."

Smith & Nephew

677.5p -18p

Broker says BUY

CHARLES Stanley recommends "using near-term share price weakness" to buy into medical devices firm Smith & Nephew after a legal ruling that went against the company in Texas.

The broker added: "We remain comfortable that end-2010 margin targets will be reached and exceeded in due course."