One of our core positions, and our largest stock in industrials (at 30 April 2021). Atlas Copco is a long-established global manufacturer of industrial tools and equipment, and is a leader in vacuum and compressor technologies, selling its industrial equipment to a broad range of end-users, notably the autos, industrials, construction, and semi-conductors industries.
It is a leading player in air compressors - compressed air is sometimes referred to as the fifth utility - critical in powering certain industries. Reasons we like Atlas Copco:
- It gives us exposure to many parts of the industrial cycle, with its diverse end-user markets exposure
- It is also well-diversified geographically, which reduces the risk of exposure to one single country or regional economic cycle
- More than a third of its revenues are derived from service, providing resilience through the cycle
- It has scale benefits, giving the company greater R&D firepower and leverage, making the company more innovative than the competition
- This in turns gives it stronger pricing power, which is an important characteristic we seek in companies
- It is best in class within the industrials sector in terms of returns on invested capital
- It has managed to more than cover its cost of capital through the cycle, even during past severe recessions, making it one of the high-quality cyclical businesses within the Industrials sector globally
Finally, it is exposed, directly or indirectly, to some attractive structural growth opportunities, notably related to:
- Green infrastructure initiatives such as renewable energy and efficient buildings construction
- Electric transportation - both railway infrastructure and electric vehicles
- 5G telephony infrastructure upgrades that are currently being undertaken
- Healthcare infrastructure which is in need of upgrades
All in all, Atlas Copco is a company that fits our search for companies that have quality growth profiles and sustainable business models.
LONG-TERM UNCONSTRAINED INSIDE STORIES
The inside story on the leading companies in our global portfolio and why they offer sustainable, long-term growth potential.
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