Tweet
($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
When I drive down Route 1 in South Brunswick, I always drive past the Raceway gas station. Raceway’s gas is always the cheapest, but the reason I go in there now and then is to buy gummy bears, a lottery ticket and sometimes a Dunkin Donuts. Most people don’t even know what a real raceway is. A raceway (sometimes referred to as a raceway system) is an enclosed conduit that forms a physical pathway for electrical wiring. Raceways protect wires and cables from heat, humidity, corrosion, water intrusion and general physical threats. Think about it if wires were allowed to be strung about all hah ho, the world would be a tangled mess. Then if the wires got bare, dogs would step on them and they’d go “Bow Wow Ow!”. That’s why we have raceways. This is what a raceway looks like:
Yesterday I bought stock in Atkore International Group Inc. (ATKR) at 40.76. I will sell this stock in 4 to 6 weeks at 46.94. Here’s why I like Atkore:
When it comes to picking a stock, first I look at the chart and my oh my what a beautiful chart:
Not only is the chart spectacular, but so is this investment. ATKR is up 88% over the last 52 weeks, yet its PE is only 14. What’s the reason for that? This boring little company just makes money, under the radar, quarter after quarter and rather relentlessly that is.
Atkore International Group Inc. manufactures and distributes electrical raceway products, and mechanical products and solutions (MP&S) in the United States and internationally. The company offers electrical raceway products, including electrical conduits and fittings, armored cables and fittings, and cable trays and mounting systems and fittings. It also provides MP&S products comprising metal framing and fittings, mechanical pipes, and barbed tapes, as well as construction services related to design, fabrication and installation, modular support structures, and fall protection. The company offers its products under the Allied Tube & Conduit, AFC Cable Systems, Heritage Plastics, Unistrut, Power-Strut, Cope, and Calpipe brands, as well as other sub-brands. It serves a group of end markets, including new construction; maintenance, repair, and remodel, as well as infrastructure; diversified industrials; alternative power generation; healthcare; data centers; and government through electrical, industrial, and mechanical contractors, as well as original equipment manufacturers. The company was founded in 1959 and is headquartered in Harvey, Illinois.
This isn’t some itty bitty company making paper clips. Atkore has almost $2 billion per year in annual revenue. Despite its size, last quarter they increases their yoy earnings by 40%. So what’s the story here?
Atkore is #1 or #2 market positions in most of their product categories. They have an established reputation as an industry leader in quality, availability, delivery, value and innovation. This has contributed to a 19% earnings CAGR. There is substantial growth opportunity as the US electrical products market is $84 billion, which means that there is a lot more market share to be captured.
Just ask their employees: “Atkore International is a great place to work. People care about one another and want each other to grow both personally and professional, and we all have the same mindset of driving the business in order to fulfill customer needs. We're growing exponentially as well, which makes every not only feel like their job is safe, but that they have an opportunity to get promoted into existing or new positions.”
Why is this such a feel good story? Atkore sells products with brands that have been around for decades, some for almost 100 years. That’s a lot of longevity and a lot of potential competition that they have been able to fend off. Many of these brands have more than 30% market share. The lion sleeps well.
For example, their Super Kwik-Couple (SKC) Raintight Conduit and Briterail were both Product of the Year Category winners. These guys make good stuff. Through mergers and acquisitions, they added over $400 million in profitable proforma revenue. As a result, their broad and growing portfolio provides value to customers. Their brands and reputation, product breadth, quality and availability have delivered success to their valued customers which consist of Global Electrical Distributors, Independent Electrical Distributors and of course the Home Depots and McMaster-Carrs of the world.
Their strategy boils down to:
Just last quarter, the company delivered excellent results in Q4 with 17.2% growth in Adjusted EBITDA Solid volume growth of 6.5%; five new product introductions in the quarter and continued growth from their focused product categories. They have very strong volume growth led by several large renewable energy projects. They are committed to producing high quality products with zero harm to the people that create, use and deliver the products as well as protecting the environment in which they work. Atkore is invested in making environment, health and safety an indispensable part of our company’s commitment to excellence.
ANAL-ysts project 2020 earnings at $3.62 per share, but with investment in infrastructure and the homebuilding resurgence, $$$MR. MARKET$$$ projects earnings of $4.15 per share. Using a PE of 14, this results in a projected share price of 14 x $4.15 = $58.10 per share, which is well past my selling target price.
Sometimes boring stories have happy endings. Here’s what the CEO had to say:
“ I am pleased to report that Atkore delivered excellent financial results for both the fourth quarter and the 2019 fiscal year. As I mentioned 2019 was a very strong year for Atkore. We increased adjusted EBITDA by $53 million or approximately 20% compared to 2018. A remarkable achievement by everyone in our organization and a credit to the results that can be achieved by following the Atkore Business Systems. In addition to the growth in EBITDA free cash flow increased 63% and we increased our adjusted EPS by 30% up to $3.62. We also made significant progress this year on improving our leverage position. We ended 2019 with a net debt to EBITDA ratio of 2.2 times down considerably from where we were at this time last year.
In summary 2019 was a year of great financial performance and EBITDA growth driven by the Atkore Business Systems. We were able to convert those earnings to cash which allowed us to both improve our leverage position and acquire four companies that will enhance our competitiveness in the marketplace. We plan to build upon that success from 2019 and continue to grow the company. For 2020 specifically we expect to increase our adjusted EBITDA to between $335 million and $345 million and use the Atkore Business Systems to drive that growth even further in the future. We are driving the new focused product categories growing up high single digits and new products which is low single digits but it all adds together.”
Well, this doesn’t mean that Jimmy G is going to win the Super Bowl and make Robert Kraft beyond faceful. I don’t even know if I have raceways in my house. What I do know is when I sell this stock, I will have some extra do re mi in my pocket to spend on all kinds of stuff.
I am HUGE!
$$$MR. MARKET$$$
When I drive down Route 1 in South Brunswick, I always drive past the Raceway gas station. Raceway’s gas is always the cheapest, but the reason I go in there now and then is to buy gummy bears, a lottery ticket and sometimes a Dunkin Donuts. Most people don’t even know what a real raceway is. A raceway (sometimes referred to as a raceway system) is an enclosed conduit that forms a physical pathway for electrical wiring. Raceways protect wires and cables from heat, humidity, corrosion, water intrusion and general physical threats. Think about it if wires were allowed to be strung about all hah ho, the world would be a tangled mess. Then if the wires got bare, dogs would step on them and they’d go “Bow Wow Ow!”. That’s why we have raceways. This is what a raceway looks like:
Yesterday I bought stock in Atkore International Group Inc. (ATKR) at 40.76. I will sell this stock in 4 to 6 weeks at 46.94. Here’s why I like Atkore:
When it comes to picking a stock, first I look at the chart and my oh my what a beautiful chart:
Not only is the chart spectacular, but so is this investment. ATKR is up 88% over the last 52 weeks, yet its PE is only 14. What’s the reason for that? This boring little company just makes money, under the radar, quarter after quarter and rather relentlessly that is.
Atkore International Group Inc. manufactures and distributes electrical raceway products, and mechanical products and solutions (MP&S) in the United States and internationally. The company offers electrical raceway products, including electrical conduits and fittings, armored cables and fittings, and cable trays and mounting systems and fittings. It also provides MP&S products comprising metal framing and fittings, mechanical pipes, and barbed tapes, as well as construction services related to design, fabrication and installation, modular support structures, and fall protection. The company offers its products under the Allied Tube & Conduit, AFC Cable Systems, Heritage Plastics, Unistrut, Power-Strut, Cope, and Calpipe brands, as well as other sub-brands. It serves a group of end markets, including new construction; maintenance, repair, and remodel, as well as infrastructure; diversified industrials; alternative power generation; healthcare; data centers; and government through electrical, industrial, and mechanical contractors, as well as original equipment manufacturers. The company was founded in 1959 and is headquartered in Harvey, Illinois.
This isn’t some itty bitty company making paper clips. Atkore has almost $2 billion per year in annual revenue. Despite its size, last quarter they increases their yoy earnings by 40%. So what’s the story here?
Atkore is #1 or #2 market positions in most of their product categories. They have an established reputation as an industry leader in quality, availability, delivery, value and innovation. This has contributed to a 19% earnings CAGR. There is substantial growth opportunity as the US electrical products market is $84 billion, which means that there is a lot more market share to be captured.
Just ask their employees: “Atkore International is a great place to work. People care about one another and want each other to grow both personally and professional, and we all have the same mindset of driving the business in order to fulfill customer needs. We're growing exponentially as well, which makes every not only feel like their job is safe, but that they have an opportunity to get promoted into existing or new positions.”
Why is this such a feel good story? Atkore sells products with brands that have been around for decades, some for almost 100 years. That’s a lot of longevity and a lot of potential competition that they have been able to fend off. Many of these brands have more than 30% market share. The lion sleeps well.
For example, their Super Kwik-Couple (SKC) Raintight Conduit and Briterail were both Product of the Year Category winners. These guys make good stuff. Through mergers and acquisitions, they added over $400 million in profitable proforma revenue. As a result, their broad and growing portfolio provides value to customers. Their brands and reputation, product breadth, quality and availability have delivered success to their valued customers which consist of Global Electrical Distributors, Independent Electrical Distributors and of course the Home Depots and McMaster-Carrs of the world.
Their strategy boils down to:
- Strong brands and leading market positions in key product categories that are all around you every day
- Solid financial and operating results across volatile market environments
- Disciplined approach to capital deployment with a demonstrated history of M&A success
- Continuing to build upon positive operational and financial results from FY 2019 into the future
Just last quarter, the company delivered excellent results in Q4 with 17.2% growth in Adjusted EBITDA Solid volume growth of 6.5%; five new product introductions in the quarter and continued growth from their focused product categories. They have very strong volume growth led by several large renewable energy projects. They are committed to producing high quality products with zero harm to the people that create, use and deliver the products as well as protecting the environment in which they work. Atkore is invested in making environment, health and safety an indispensable part of our company’s commitment to excellence.
ANAL-ysts project 2020 earnings at $3.62 per share, but with investment in infrastructure and the homebuilding resurgence, $$$MR. MARKET$$$ projects earnings of $4.15 per share. Using a PE of 14, this results in a projected share price of 14 x $4.15 = $58.10 per share, which is well past my selling target price.
Sometimes boring stories have happy endings. Here’s what the CEO had to say:
“ I am pleased to report that Atkore delivered excellent financial results for both the fourth quarter and the 2019 fiscal year. As I mentioned 2019 was a very strong year for Atkore. We increased adjusted EBITDA by $53 million or approximately 20% compared to 2018. A remarkable achievement by everyone in our organization and a credit to the results that can be achieved by following the Atkore Business Systems. In addition to the growth in EBITDA free cash flow increased 63% and we increased our adjusted EPS by 30% up to $3.62. We also made significant progress this year on improving our leverage position. We ended 2019 with a net debt to EBITDA ratio of 2.2 times down considerably from where we were at this time last year.
In summary 2019 was a year of great financial performance and EBITDA growth driven by the Atkore Business Systems. We were able to convert those earnings to cash which allowed us to both improve our leverage position and acquire four companies that will enhance our competitiveness in the marketplace. We plan to build upon that success from 2019 and continue to grow the company. For 2020 specifically we expect to increase our adjusted EBITDA to between $335 million and $345 million and use the Atkore Business Systems to drive that growth even further in the future. We are driving the new focused product categories growing up high single digits and new products which is low single digits but it all adds together.”
Well, this doesn’t mean that Jimmy G is going to win the Super Bowl and make Robert Kraft beyond faceful. I don’t even know if I have raceways in my house. What I do know is when I sell this stock, I will have some extra do re mi in my pocket to spend on all kinds of stuff.
I am HUGE!
$$$MR. MARKET$$$
All aboard!!!!!
Comment