A buy-and-hold standout

(Fortune Magazine) -- It may not grab a lot of headlines, but Emerson Electric (Charts, Fortune 500) is a stock that has "core holding" written all over it. Founded in 1890, this diversified technology company has attracted some impressive investors for its consistent earnings, long-term growth potential, and rock-solid balance sheet.

Emerson was primarily an equipment manufacturer - think flow meters for refineries and compressors for cooling devices - but it has taken its gear to the next level, providing sophisticated systems that monitor equipment, measure liquid and gas flows, anticipate breakdowns and ultimately use energy more efficiently.

For Emerson that transformation has meant revenue growth (up 14 percent in the second quarter), stable earnings, and an ideal position to take advantage of the growing green wave in the U.S. and aboard.

Bob Millen, chairman of Jensen Investment Management, likes Emerson's cash flow and return on equity - key criteria for inclusion in the top-performing Jensen fund. "They have enough redundant cash," he says, "to fund organic growth, make acquisitions, buy back shares, and pay a dividend [of 2.2 percent ]" while delivering, on average, expected 10 percent earnings gains for the next ten years.

One major growth driver is an increase in business in faster-growing markets overseas, which accounted for 47 percent of Emerson's $20 billion in total sales in 2006. William Frels, lead manager of the Mairsand Power Growth fund, expects that percentage to climb to 50 percent this year, helping fuel Emerson's record of consistent earnings improvement.

Frels adds that at 16 times estimated 2008 earnings, Emerson is on the cheap side of its historical P/E range. That, coupled with overseas expansion, product enhancements, riding the green revolution, and a strong balance sheet, should keep Emerson Electric's stock energized for years to come.