It’s no secret that industrial manufacturing has been in a down cycle. But while activity came to a virtual standstill during the financial crisis, it’s slowly picking back up as conditions improve and a long-term winner from all of this is Lincoln Electric (NYSE: LECO).
Lincoln is a leading provider of arc welding and cutting products and is one of only three companies with a global footprint that offers both welding equipment (the power sources that generate the heat to join the metals together) which makes up about 35% of sales along with the welding consumables which are about 65% of sales. And I love the recurring nature of those consumables.
Given that Lincoln’s major end-user markets include structural steel construction (think buildings and bridges), automotive and offshore oil and gas exploration and extraction the company’s global market opportunity is tremendous. In 2002 approximately two-thirds of Lincoln’s business came from its North American market with the other third international. Today that split is closer to 50/50 with 15% (and growing) of the company’s business coming from the BRIC (Brazil, Russia, India and China) economies as well as other emerging markets .
Think of this one as a "slow and steady wins the race" kind of holding. No doubt it's cyclical and will be volatile at times. But those times of volatility can present great opportunities for long-term investors. It may not be the most exciting company in the world, but they are great at what they do and have a tremendous market opportunity in front of them. Think about this: The American Society of Civil Engineers estimates that the US will need to invest around $3.6 trillion in its infrastructure through 2020 just to get back to an acceptable level. This includes things like bridges, roads, water infrastructure, energy infrastructure, dams, schools, rail, waste and much more. Is this report just a bit self-serving? Of course it is. The ASCE stands to benefit its members by saying there's much work to be done. But a basic sniff test is all it takes to see that there is plenty to do, so it's not an all-or-nothing deal. This is the market opportunity that exists in the US. Now think about it on a global scale, especially with emerging economies and the work they will require just to get up and running.
While what it does may sound boring, research and development of new products and methods is high on Lincoln’s list of priorities and has resulted in a meaningful impact on top line sales which have grown at a CAGR of 18% over the last three years. Investors can expect good things going forward and I believe that between the company’s significant market opportunity along with a rock solid balance sheet and consistently strong cash flow Lincoln is an excellent company and certainly worth a look at 21 times earnings today.
Disclosure: I don't currently hold a position in Lincoln Electric.
Lincoln is a leading provider of arc welding and cutting products and is one of only three companies with a global footprint that offers both welding equipment (the power sources that generate the heat to join the metals together) which makes up about 35% of sales along with the welding consumables which are about 65% of sales. And I love the recurring nature of those consumables.
Given that Lincoln’s major end-user markets include structural steel construction (think buildings and bridges), automotive and offshore oil and gas exploration and extraction the company’s global market opportunity is tremendous. In 2002 approximately two-thirds of Lincoln’s business came from its North American market with the other third international. Today that split is closer to 50/50 with 15% (and growing) of the company’s business coming from the BRIC (Brazil, Russia, India and China) economies as well as other emerging markets .
Think of this one as a "slow and steady wins the race" kind of holding. No doubt it's cyclical and will be volatile at times. But those times of volatility can present great opportunities for long-term investors. It may not be the most exciting company in the world, but they are great at what they do and have a tremendous market opportunity in front of them. Think about this: The American Society of Civil Engineers estimates that the US will need to invest around $3.6 trillion in its infrastructure through 2020 just to get back to an acceptable level. This includes things like bridges, roads, water infrastructure, energy infrastructure, dams, schools, rail, waste and much more. Is this report just a bit self-serving? Of course it is. The ASCE stands to benefit its members by saying there's much work to be done. But a basic sniff test is all it takes to see that there is plenty to do, so it's not an all-or-nothing deal. This is the market opportunity that exists in the US. Now think about it on a global scale, especially with emerging economies and the work they will require just to get up and running.
While what it does may sound boring, research and development of new products and methods is high on Lincoln’s list of priorities and has resulted in a meaningful impact on top line sales which have grown at a CAGR of 18% over the last three years. Investors can expect good things going forward and I believe that between the company’s significant market opportunity along with a rock solid balance sheet and consistently strong cash flow Lincoln is an excellent company and certainly worth a look at 21 times earnings today.
Disclosure: I don't currently hold a position in Lincoln Electric.
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