Roll Up, Roll Up!
A leading serial acquirer & "Buffett" stock down ~40%, now a watchlist quality-value situation
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In this issue of the newsletter I set out the investment case for a Watchlist Idea that is very close to being actionable.
The subject company is a serial acquirer that has outperformed many of the most highly regarded serial acquirers such as TransDigm Group, Halma Plc and Danaher Corporation over the past 10 years, and is the market-leader in its core markets with an excellent long-term track record of growth and value creation. Furthermore, this business is a “Buffett Stock,” being the type of high-quality industrial business that meets all of Berkshire Hathaway’s acquisition criteria.
The stock is down ~40% from its 52 week high, and trades at ~12.5x LTM EBITDA, which represents a steep discount to its long-term average multiple of ~16x and its more recent average of ~19x over the past five years.
The market has discounted the stock over the past 12 months due to recessionary concerns, but I believe this overlooks this company’s resilience and exposure to a number of structural growth trends including decarbonisation, infrastructure investment and technology that should insulate it from an economic slowdown.
As such I regard this stock as a quasi-real asset/infrastructure play and a high quality value situation trading at a very reasonable price relative to its longer-term prospects. In reviewing this company, I’m reminded of Buffett’s maxim -
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”